It was a wild week but not as bad you think.

Market breadth for the week was bearish with far more declining issues than advancers, as the number of 52-week lows climbed markedly.

But overall volume was very light and NASDAQ stock buyers showed more conviction the sellers.

Market Breadth	NYSE	NASDAQ
Advancers	1,222	1,509
Decliners	2,155	2,694
52-Week Highs	820	784
52-Week Lows	95	231
Up Volume	12.6 million	17.2 million
Down Volume	14.3 million	12.7 million

Message of the Market

Energy names took it on the chin but are still up significantly since the election.  There was profit-taking in Financials.  Tech also saw serious pressure, although Communication Services rebounded nicely. 

S&P 500 Index		-0.77%
Communication Services XLC	+0.96%
Consumer Discretionary XLY		-0.19%
Consumer Staples XLP	+0.35%
Energy XLE		-7.54%
Financials XLF		-1.58%
Health Care XLV	+0.41%
Industrials XLI		-0.31%
Materials XLB		-0.88%
Real Estate XLRE		-1.00%
Technology XLK		-1.38%
Utilities XLU		-0.34%

My Main Message: Be Cool

That’s my main message coming into the new trading week.  After five weeks of turmoil, and the collapse in stocks everyone is holding directly or indirectly, there was a general sense the market had lapsed into a correction.

Moreover, many were asking would this be a severe correction. My reply is:

We haven’t.

I don’t think so.

The market has not lapsed into a correction.  In fact, the S&P 500 is less than two percentage points from its all-time high.  And while I know there will be a correction on the horizon, which means today to the end of time, for now, I do not think the next one will be severe.

The fact is, a ton of money is sitting on the sidelines and a ton has already begun to pour into the economy, as travel in the United States remains firm and all the malls in my neck of the woods were a lot more crowded.

People were out spending their stimmy checks.  This morning, the WSJ had this chart underscore the pickup in recreation in the US and Europe. 

Get Your Copy 14 Page Payne's Perspective Don't Panic

Dry Powder

Another chart in the Journal is what I have been writing about for more than six months.  Record low debt payments to disposable income couple with record high savings as a share of disposable income means there is a ton of disposable income.

Dry powder has been one of the macro drivers of my investment thesis for a long time and a reason why I did not panic with the outcome of the election.

Too Much of a Good Thing?

It might sound like a rhetorical question, or the title to a great blues song, but many are wondering it there could be too much of a good thing with all that cash sloshing around.

The I-word has begun to dominate, but the Fed is saying don’t even worry about it.  Yes, there will be upward pressure on prices, as all that cash is spent by a public that has been cooped up for a year. But enough folks will save, and the spree will be too short-lived for Powell & Co to panic.  They will be hitting the road this week (mostly virtually) to prove they are all on the same page (no rate hike before 2023) and united in the goal of accommodation.

This morning, the ten-year yield is lower, but the spread between the 10- and 2-year yields continues to steepen – now at highest level since 2015

Remember when the inverted yield curve was a sure signal of the end of the world?  Now, the financial media will scream steepening is to be feared and reason to sell positions (ownership) in great stocks.

10Y2Y Spread

Portfolio Approach

We are adding to Consumer Discretionary in our Hotline Model Portfolio.

Today’s Session

We have a family friend that called my wife on Saturday just to catch up.  He works for Gucci in customer service and said he was wiped out.  They are working around the clock.  He told my wife: “they won’t stop spending their stimmy and tax refunds.”

Make no mistake a lot of folks are out there spending their stimmy. 

Waiting for existing home sales and to get sense of how much the Fed parade of speakers calms bond gyrations.

Tweet

 

Home | Products & Services | Education | In The Media | Help | About Us | Disclaimer | Privacy Policy | Terms of Use | All Rights Reserved.