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Morning Commentary

NARRATIVE & REASON

By Charles Payne, CEO & Principal Analyst
6/12/2020 9:45 AM

The market stumbled out of the gate on Thursday and never gained its footing, as selling triggered more selling, which triggered more selling.

In many ways, the pullback was overdue, but it’s nonetheless worrisome. I said the bears would craft their next plan of attack and its dovetails perfectly with the inevitable. There will be an uptick in new cases with increased testing and economic activity. 

Note: Yesterday morning, there were 20,839 cases. In sessions after higher reports, the market rallied.  They are going to grind it into the ground, hoping one day soon it will be legitimate.

New Cases & Market Reaction

Date

New Cases

Market Reaction

May 26

24,544

+1.5%

May 30

23,395

+0.4%

June 1

21,894

+0.8%

June 4

21,612

+2.6%

June 5

28,692

+1.2%

June 6

22,518

+1.2%

 

Every investor can see this downward trend is anything but ominous.

Politics and Financial Reporting

I read where 20 states have seen sharp increases, which infers that 30 states have not seen sharp increases in new cases. The fact of the matter is that states are being singled out is for political fodder; a narrative to use against governors and a certain political party for opening too.

There’s no word on the fact that testing has skyrocketed in these states, along with California, which hasn’t even reopened - and that has something to do with new cases. By the way, remember when the lack of testing was the main story and final hurdle for reopening?

Anyway, check out those parabolic spikes (legit use of the word) in state testing.

The Bottom Line

The thing is everyone knows there will be more cases as folks reemerge from their homes. The issue was supposed to stop local hospital systems from being overwhelmed. The notion that the market somehow tumbled on a “spike” in new cases is a false narrative. But pounding home messages to craft more concerns and set up even more disturbing news, is what the media does the best these days.

After all, if you consider 20,839 a spike, what happens when the number comes in much higher? That is the setup we find ourselves in as headlines will read “Greater Spikes” in ensuing days and weeks.

It’s A Lot Harder Than Throwing Darts

Over the last week, the bandwagon that is trying to rationalize the market rally has concluded it was the only game in town, and there was no alternative.

Well, the S&P 500 was approaching 200 winners on the year but finished yesterday with the smallest number of winners since 1997 on May 8th.

Back Into Bonds

And just like that, the rotation out of bonds into equities lasted about the lifespan of a 17-year cicada.   The stock market can rally with yields down here, but there was a sharp and steepening yield curve, and all eyes were on the exits.

I do not think this is what Fed Chair Powell had in mind when he insisted the Fed didn’t care about asset bubbles – because asset bubbles care about the Fed. The Street had a meltdown after not getting more information on the next source of accommodation. 

Powell missed the boat and sank the market.

10-Year Yield

Portfolio Approach

We made several adjustments to the Current Buys List and are adding a new position this morning in Industrial.  If you have any questions, contact your account representative or email Research@wstreet.com.

Today's Session

The markets are gaining back some of yesterday's major losses and are all trading in the green. 


Comments
How well would the markets do if the "media" kept their nose out of it

Tim Abbott on 6/12/2020 10:13:09 AM
I wish Powell would just shut up.

Steve Accardi on 6/12/2020 10:42:55 AM
 

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