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Morning Commentary


By Charles Payne, CEO & Principal Analyst
10/22/2020 9:30 AM

Yesterday was another sloppy finish for another session that never really got off the ground. It reminds me of my efforts to “go fly a kite.” 

I have never been good at it, and I always envied those folks in the park with the kite flying high in the air, even doing aerodynamic tricks. Then again, back in the day, I had poorly constructed homemade kites that never really had a chance.

I guess one could say that during the session, investors were flying a kite just like Ben Franklin, as the market was in discovery mode.

However, today, if you use the term “go fly a kite,” it would have an entirely different meaning from the 1929 version of the expression (see sidebar).

The bottom line is the session was uneventful with a tinge of frustration. All the major indices finished lower, although there was never any danger of a serious selloff.

Market internals were uglier than the print for the major equity indices:

Earnings Parade

After the close, a long list of names posted financial results, and just about all of them beat the Street, and several offered higher guidance.

Transportation names have been rocking, and that’s a great sign for the economy, as one could argue this sector is the best proxy for Main Street economic projections. CSX popped 4% on the news (new all-time highs on strong volume) and could see a true breakout today.


Hotline Model Portfolio Approach

There were no changes the Hotline Model Portfolio yesterday.

We took profits on Whirlpool (WHR) a few days ago at $201, in part to early signs that the underlying fundamentals may not have kept up with the big move in the stock price. But also in part because at the time, we were fully vested in the model portfolio, and we moved into Avis Budget Group (CAR). So the gain mitigates the hindsight stuff that can haunt investors.

We are close to fully invested in the model portfolio. 

For those with larger portfolios ($400,000+), my potential buy list includes:


Today’s Session

I ws asked this question this morning: “Seems that the dragging out of the stimulus is holding the market back.”

There are a lot of factors with the market, and what's happening now is indicative of the early part of earnings season.  I do not think a lot of investors did anything based on stimulus.  Most professional investors are modeling $2.0 trillion during Trump or $3.0 trillion in a Biden administration.  Be careful of talking heads, especially those that never managed a nickel in real life. 

There always has to be a reason, and it always has to be at the surface.  The market has made a big move from the lows, and what I'm seeing is a digestion phase.  So far, earnings have been fantastic and guidance robust.  Using history as a guide, once we are close to this period of financial reports, we will see a more decisive outcome with respect to broader market direction; although, it will continue to be very selected. 

Better Economic News

Initial jobless claims declined significantly more than anticipated to 787,000

Continuing jobless claims dropped by more than one million to 8.37 million. 

The grand total of folks on some form of unemployment benefits as of October 3rd is 23,150,427 and down 1,046,493 from the prior week.

This is very encouraging news, and yet the total number of Americans receiving some form of assistance a year ago was only 1,393.973.

We have a long way to go but are getting there faster than anyone assumed or thought possible.

My question is; what is our economy going to look like when all the dust settles from the Covid and presidential election? We are in deep debt as a country and there will be more people either losing or switching jobs like musical chairs in the aftermath. Has the market really baked all this in the prices?

William Brown on 10/22/2020 1:59:05 PM
I always thought it meant go outside,
fly a kite like Ben Franklin and hopefully you'll get electrocuted.
And market definition: Raise your risk to catch the up draft.

Donald McArthur on 10/22/2020 2:56:06 PM

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