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The Best of What They Said and I Read Week Ending 2/2/2020

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 – January 31, 2019 – The Dow Finally Took the Coronavirus Seriously and Dropped 733 Points – Ben Levisohn

  • “… Like a houseguest who has overstayed his welcome, the coronavirus has been in the headlines long enough that the market couldn’t ignore it any longer…Friday came, and the market sold off with a vengeance. All told, the Dow dropped 733.70 points, or 2.53%, to 28,256.03 this past week, while the S&P 500 fell 2.1%, to 3225.52, their largest one-week declines since Aug. 2.”
  •  “…the stock market is no longer overbought. More than 80% of S&P 500 companies closed above their 50-day moving averages on Jan. 17, a level last reached in mid-2019. On Friday, that number dropped to 45%. At the same time, volatility, which had been hibernating, suddenly revived. The Cboe S&P 100 Volatility Index, or VXO…traded as high as 21.60 on Friday after 76 days below that level.”
  •  “…the stock market has risen in the months after such spikes in volatility following long periods of calm, according to Sundial Capital Research. For instance, the S&P 500 had a median gain of 8.5% six months later and was positive 90% of the time.  That doesn’t mean the pain is over—the S&P 500 is down just 3.1% from its all-time high hit on Jan. 17, after all.”

 Barron’s – January 31, 2019 – The Stock Market Is Falling, as We Predicted.  But for All the Wrong Reasons – Randall W. Forsyth

  • “… Now, however, the markets face a twofold risk, according to J.P. Morgan’s strategy team…Markets are expensive and “well owned” (that is, investors have already bought all the securities they want), which makes them vulnerable if Chinese factories don’t reopen by Feb. 9, as expected. That also coincides with the beginning of the Democratic presidential selection process, which kicks off on Monday, Feb. 3, with the Iowa caucuses. No race—for the Democratic primaries, the presidential election, or for the Senate—looks clear after accounting for margins of error and bias, J.P. Morgan contends. The latest Wall Street Journal/NBC News poll shows the least market-friendly candidate, Sen. Bernie Sanders, the self-described democratic socialist from Vermont, holding a slim lead, with 27% of Democratic primary voters favoring him, over former Vice President Joe Biden’s 26%.”
  •  “With the Iowa caucuses set to be followed by primaries in New Hampshire on Feb. 11, Nevada on Feb. 22, South Carolina on Feb. 29, and Super Tuesday on March 3, the contests could further roil markets already on edge from the growing impact of the coronavirus. The worst-case scenario for the market would be Sanders or his rival on the left, Sen. Elizabeth Warren of Massachusetts, winning the White House, with a Democratic sweep of the House and Senate in November, the bank’s strategists argue in a client note. The best case, they contend, would be for Biden to gain the nomination and win the general election, with Republicans maintaining hold of the Senate. The next-best case would be the re-election of President Donald Trump, which would probably mean a more aggressive foreign policy, the J.P. Morgan strategists say (don’t blame this columnist for their analysis, if you don’t like it).”

  U.S. Global Investors - Investor Alert – January 31, 2020 – Frank Holmes 

  • “…I’ve talked before about ESG—or “environmental, social and corporate governance.” Such ETFs strategically limit their exposure to companies that produce lots of carbon, for example, while boosting those that may have greater diversity on their boards and in the C-suite. For many years now, ESG has been a niche focus, seeing muted flows by only the most “green”-minded investors. A tipping point seems to have occurred in 2019, though, with net flows into open-end and exchange-traded ESG funds topping $20.6 billion, according to Morningstar data. That’s four times the amount that such funds attracted the previous year. ESG appears to have gone mainstream. And yet this may only be the beginning. A January survey conducted by the deVere Group found that a whopping eight out of 10 millennial investors around the globe cited ESG as a top priority when considering investment opportunities, trumping even anticipated returns and past performance. Millennials are now the largest living generation, having surpassed baby boomers, so this change in investor appetite is expected to transform world markets.”

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