A Comment -- General Comments From an Expert (A Commentary)
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Market. November was a strong month. We are finally seeing a much broader strength in the market. It looks positive going into 2021. We are stretched a little at these levels short term, however. Any pullbacks will be pretty good buying opportunities during December. He thinks we will see a weaker US dollar going into 2021. Global growth looks positive as we go into a post-COVID world.
BUY
Telehealth Stocks. He is more familiar with Cloud MD. The adoption was always something you could see but the pandemic has brought that forward. It is definitely an area of healthcare that is interesting. There is definitely upside to the sector as a whole. It is hard to know which company is going to do the best so own small positions in two or three of them.
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How to Buy Volatility. Over the last ten years the VIX has moved higher at the same time as the market sells off. It still has not been below 20 since March and we saw a significant run in stocks. Volatility is up at the same time as markets and this does not happen often. The traditional correlation is breaking down. It feels like we are in the beginning of the market top blowing off. Prepare to be in an environment where we still have an elevated VIX.
COMMENT
The return of retail investors has changed the face of investing. Conventional wisdom has been turned on its head during Covid, driven by young retail investors: forget ETFs and bonds, they pick individual stocks. And they don't care about PE and other metrics, though they will research on the internet themselves. They're picking stocks well and don't care what Wall Street says. The internet has freed these investors from the dominance of Wall Street money pros. Also, the young are strong believers of ESG investing.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. If inflation coincides with a strong economy, industrial and tech stocks have good pricing power. Gold and other metals are also a good option as a hedge against inflation. Unlock Premium - Try 5i Free
COMMENT
We see a rotation into value oriented stocks. He thinks it might be too much too quickly though. We saw the economy shut down and he does not think it will restart on an even keel. There is still the logistics of rolling out the vaccine. The shutdown induced economic problems will persist for a while.
COMMENT
Banks. A lot of investors have been using banks stocks as a means of gaining some yield in a low interest rate environment. Those dividends are still well covered by earnings. Assuming economic pick-up, the banks will benefit from that. Net interest margins are pretty low but with economic improvement, we could see changes in interest rates.
COMMENT
Billy Kawasaki’s Insights - Billy’s most-liked answers from 5i Research. Higher current valuations in the stock market may lead to a more muted 2021. However, it is not impossible to see a strong year, especially with earnings expected to grow, an effective vaccine and overall recovery in economic activities. Unlock Premium - Try 5i Free
COMMENT
Wall Street rallied today because of stimulus hopes despite bad news (disappointing jobs report, rising Covid cases). Will we really get stimulus? If there isn't progress this weekend, he fears markets will get hammered Monday. We absolutely need a stimulus deal, even a small one. The markets are divorced from the horrible reality of Covid.
COMMENT
Most important factors driving markets right now? We've moved from a disinflationary to an inflationary cycle. Evident in US dollar weakness, yields are starting to back up, commodities prices, short cycle assets that benefit from a strong economy. Markets are looking beyond Covid and trying to position.
COMMENT
How should investors play the falling US dollar? Tailwind for certain assets. US dollar is a safe haven. When people become more comfortable with risk, they take money out and put it in riskier assets like global stocks such as Japan or Taiwan, emerging markets, machinery companies. A different story entirely from building a portfolio that benefits from falling rates and is immune to the business cycle.
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