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The Best of What They Said and I Read Week Ending 9/13/2020

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 – September 12, 2020 – Next Year Looks Rocky for the Stock Market No Matter Who Wins the Election – Al Root

  • “…Things were already looking rocky this past week. The S&P 500 index fell 2.5% to 3341, while the Dow Jones Industrial Average declined 468 points, or 1.7%, to 27,666. The tech-heavy Nasdaq Composite dropped 4.1% to 10,854, extending the previous week’s losses.  They could soon get worse. No matter if Donald Trump or Joe Biden wins in November, next year will be the first year of a new presidential term. And that’s a notoriously tricky time for the stock market.”
  • “The presidential investing cycle holds that things are weakest in the first half of any president’s term and strongest in the second half. “In year four politicians do fiscal stimulus to get re-elected,” says Brian Rauscher, head of global portfolio strategy and asset allocation at Fundstrat. Years one and two are about making tough decisions about policy, deficits, and taxes. The average year-one return of the Dow is about 7%. The average for the S&P 500 is about 6%. In year two, the average return for both indexes dips to roughly 4%.”
  • “…Along with weak returns, there is another reason to watch out for year one. The Dow and S&P fall about 45% of the time in the first year of a presidential term, the worst of any of the presidential years. The odds of a decline in any other year is about 30%.”  

 U.S. Global Investors – September 11, 2020 – Frank Holmes

  • “…Veteran bull Ed Yardeni says stocks can fall another 10-15 percent, writes Business Insider, but the market will then make a 'comeback'. "I'm actually somewhat comforted by the market taking a break here. It's a healthy development," the economist said of last week's sell-off…Jeffrey Gundlach says the day-trading boom is “downright terrifying,” specifically noting that an increase in trades-per-account on online brokerage platforms was worrying. Additionally, a Wall Street expert says the emerging “species” of risk-loving day traders is threatening to upend an already vulnerable stock market. "Right now, anyone trying to trade this market needs to better understand this new species of trader," Academy Securities' Peter Tchir said.”
  • “…China announced a five-year plan beginning in 2021 that will call for increases to its huge inventories of crude oil, strategic metals and farm goods. The move is likely an effort to ensure the nation is stocked up in case of another global pandemic or supply chain disruption. This is positive for commodity demand.”
  •  “…NASA is seeking bids from explorers who are willing to finance their own trips to the moon to collect soil or rock samples without returning any material to earth, reports Bloomberg. The purpose is to establish a legal framework for mining on the moon that would allow NASA to one day collect ice, helium and other materials. The agency said it anticipates paying between $15,000 and $25,000 per moon contract.”
  •  “…According to the World Health Organization and Bloomberg calculations, Western Europe has surpassed the United States in new daily coronavirus infections, re-emerging as a global hotspot. The 27 countries, the European Union plus the United Kingdom, Norway and Iceland and Lichtenstein recorded 27,233 new cases on Wednesday, compared with 26,015 in the U.S. In recent weeks Europe has seen a resurgence in infections especially in Spain, France and Italy.”  

 

 Kiplinger’s Personal Finance Adviser – September, 2020 

  • “…The fiscal outlook for Medicare and Social Security:  Bad and getting worse as the pandemic and its economic effects further undermine the finances of America’s main government health care and retirement programs.   Fewer people working and paying taxes means less income for the program’s trust funds, which were already on track to run out over the next 10 to 15 years without a fix.  The first trust fund in line to run out: Medicare Part A, the program that pays for hospital stays and certain other care. Government auditors estimate that this trust fund will go bust in fiscal year 2024, triggering a 17% benefit cut. Then Social Security’s Disability Insurance Trust Fund, in FY 2027. Then Social Security itself, its main trust fund exhausted in FY 2032. None of these programs will suddenly shut down. But they’ll face cuts in the benefits they pay out if Congress can’t agree on how to stabilize them.   When their trust funds run dry, benefits must be cut to match tax revenues, unless Congress authorizes additional spending. Meanwhile, the federal debt will keep piling up, making it harder to shore up the big entitlement programs in the future. Keeping them solvent will crimp funding for everything else. Whoever is elected president will have to grapple with this thorny issue. Any fix…higher taxes, lower benefits…will be extremely unpopular.”

 


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