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The Best of What They Said and I Read Week Ending 4/26/2020

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 – April 24, 2020 – Yes, Stocks Have Rallied.  Just Don’t Get Complacent. – Randall W. Forsyth

  • “The stock market has mounted a remarkable recovery from its lows touched just a month ago, lifted in equal measures by the massive fiscal and monetary steps taken to counter an unprecedented economic downturn brought on by efforts to contain the coronavirus outbreak. Even as the pandemic’s death toll climbed past 50,000 in the U.S., the S&P 500 index ended the week only 16% below its peak of two months ago.”
  • “…the market’s resilience puzzles many investors. “Everyone, it appears, is struggling to balance appalling fundamentals versus a torrent of liquidity,” writes Julian Brigden, chief economist of Macro Intelligence 2 Partners. The liquidity comes courtesy of the Federal Reserve, whose balance sheet has ballooned by 58.6%, to more than $6.5 trillion, in the past two months. That has helped to finance the massive federal fiscal injections, with $484 billion added in the latest measure this past week to the $2 trillion-plus Cares Act.”
  • “The equity and credit markets also have experienced their fastest-ever recoveries, according to a J.P. Morgan research note lead-authored by John Normand…Since the March 23 low, the S&P is up 26.8%.   Moreover, much of the S&P’s strength has been concentrated in five technology-related mega-cap stocks, write Jason DeSena Trennert and Ryan Grabinski of Strategas Securities. The FMAGA group— Facebook (FB), Microsoft (MSFT), Apple (AAPL), Google parent Alphabet (GOOGL) and Amazon.com (AMZN)—accounts for 20% of the market. These giants undeniably have been more resilient against economic shocks, but “they are not entirely immune from the economic conflagration [in which] we now find ourselves,” they write in a client note.”

U. S. Global Investors – April 24, 2020 – Frank Holmes

  • “…The major market indices finished mixed this week. The Dow Jones Industrial Average lost 1.93 percent. The S&P 500 Stock Index fell 1.32 percent, while the Nasdaq Composite fell 0.18 percent. The Russell 2000 small capitalization index gained 0.32 percent this week…The 10-year Treasury bond yield fell 4 basis points to 0.60 percent.”
  •  “…A toilet paper squeeze could get even worse. Bloomberg reports that 25 percent of Canadian sawmill capacity is shut after two producers idled operations amid a price slump and poor outlook for spring building. Supply cuts meant to help the lumber market instead led to a shortage of wood chips that are used to make toilet paper, wipes, cardboard boxes and more. Another shortage on the way? Meat. JBS SA, the world’s top meat company, closed its Minnesota facility after a coronavirus outbreak. Bloomberg reports that the facility accounts for almost 5 percent of total U.S. capacity. Some industry analysts believe there may only be 2-weeks supply of frozen meat in cold storage.”

The Kiplinger Letter – April 24, 2020 

  • “COVID-19 can’t and won’t kill globalization, the economic interdependence resulting from the flow of goods, people and capital across national borders. But it will shake up global supply chains, as new technology creates new opportunities and trade barriers force a shift in global production. Globalization was already in a lot of trouble: Global trade has been slowing, growing 3.5% per year on average since the Great Recession, versus 7.6% before the global financial crisis. Protectionism is on the rise, exemplified by the trade war between the U.S. and China. And the risk of disruptions is high when production of critical goods is dispersed throughout the world, yet heavily concentrated in a handful of countries, most notably China. COVID-19 is only intensifying these issues.” 
  • “What will the post-pandemic world look like? Supply chains will shift away from China… But not entirely. Despite rising labor costs, theft of trade secrets and its trade war with the U.S., China is still the world’s factory, accounting for 40% of finished-goods production. It also makes most of the world’s manufacturing components, ranging from steel and batteries to printed circuit boards and active pharmaceutical ingredients. Most U.S. companies say they plan to keep supply chains in China, though the number who are considering a change is on the rise.”

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