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The Best of What They Said and I Read Week Ending 10/11/2020

Short excerpts from articles I found interesting.  I may not agree with the author and the following material is not intended as investment advice

 Barron’s – October 9, 2020 – Forget Economic Stimulus.  This is Why the Dow Had a Great Week. – Ben Levisohn

  • …The Dow Jones Industrial Average advanced 904.09 points, or 3.3%, to 28,586.90 this past week, its second consecutive weekly gain, while the S&P 500 index rose 3.8%, to 3477.13, and the Nasdaq Composite gained 4.6%, to 11,579.94…the small-company Russell 2000 index climbed 6.4%, to 1637.55.”
  •  “Why the market is going higher might be less important than how it’s rising. It wasn’t that long ago that everyone was worried because big tech stocks like Apple and the other FAANGs were leading the market higher, while everything else sat out. Megacap strength was taken as a sign of that investors were playing defense, making the rally suspect in the process. Now, most stocks are participating. Need proof? The Invesco S&P 500 Equal Weight exchange-traded fund (RSP) has risen more than 13% during the past three months, outpacing the SPDR S&P 500 ETF’s (SPY) 10% rise during the same period. It isn’t just Apple.”
  •  “In fact, the market rally has broadened out so much that future gains look likely, if history is a judge. The reason? The S&P 500 just experienced a “breadth thrust,” the term used to describe a 10-day period in which advancing stocks outnumbered decliners by at least 2-to-1. That doesn’t happen very often—just 29 times since 1990—and it signals massive buying pressure in the market, according to Keith Lerner, chief market strategist at SunTrust Advisory Services. When a breadth thrust occurs, the S&P 500 has been higher 12 months later 96% of the time for an average gain of 13%.”


U.S. Global Investors – October 2, 2020 – Frank Holmes

  • “…The huge service side of the U.S. economy — retailers, restaurants, banks, hospitals and the like — expanded in September for the fourth month in a row and overall employment also grew in the sector for the first time since the pandemic began, a survey business executives showed. The index of nonmanufacturing companies rose to 57.8 percent last month from 56.9 percent in August, the Institute for Supply Management (ISM) said Monday.”
  •  “…The U.S. trade deficit in goods and services rose 5.9 percent in August, climbing to its highest level in 14 years, according to data released Tuesday by the Census Bureau. The difference in value between the goods and services the U.S. exported and imported in August…up $3.7 billion from a revised total of $63.4 billion in July, according to the Census Bureau. The August 2020 trade deficit was the highest since August 2006..the trade deficit widened significantly over the summer as purchases of imported goods increased at a faster rate than services exported by U.S. businesses abroad.”
  •  “…Bloomberg’s Samson Ellis writes that fear is growing among analysts that China might finally follow through with its threat to invade Taiwan, potentially triggering a war with the U.S. Ellis notes that last month the People’s Liberation Army aircraft repeatedly breached the median line in the Taiwan Strait. President Xi Jinping’s desire to cement his legacy by gaining “lost” territory and failing support in Taiwan for a union with China could push the conflict further into action in the next few years.”

 Schwab.com – October 5, 2020 – Electiion Blues:  Looking at Election History for Market Guidance – Liz Ann Sonders

  •          …if an investor had invested $10,000 starting in 1900, but only had it in the Dow when Republicans were president, it would now be worth nearly $99k. On the other hand, that same $10,000 would have grown to nearly $430k if it was invested only when Democrats were president. Seems like an obvious decision to make then? Not so fast. That same $10,000 in 1900 would have grown to more than $4.2 million if the investor had remained in the market the entire time, regardless of which party has presidential power.”
  •           “…Last year, political historian and journalist Michael Barone wrote the book How America’s Political Parties Change (and How They Don’t) in which he “politely asks the prognosticators to take it easy.” As Barone highlights in the book, the current environment may not be as extreme in its differences relative to history as some believe. After every significant national crisis in America, our government has emerged with sometimes-greater, but always new and different roles.”
  •          “…Barone wrote about the “long history—and striking resilience—of our two political parties. Both parties have changed their policies, adapting to economic and demographic circumstances and to signals in the political marketplace. The fact that they have been doing so, performing those functions under stress and despite some massive setbacks for so long provides some basis for thinking they will pass through the stress test being administered by [President] Trump, his Republican fans and critics, and his Democratic opponents, as they have passed through others even more stringent many times before. Perspective is a better guide to reality than panic.”

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