I'm feeling pretty good
What you need to know this week in 5:14 minutes - Nov 30, 2020
Mr. Market is feeling pretty good right now. Biden’s initial cabinet selections provide clarity into the direction of the economy and positive vaccine news offers hope for a return to normalcy.
Biden’s team assembles!
Congress debilitates on a stimulus plan
Back to economics
What's going on?
Biden team assemble!
The Electoral College meets on Dec. 14th and it seems all but confirmed that Joe Biden will become the 46th President of the United States. Trump’s legal team has lost so many times that the New York Jets are considering suing them for trademark infringement. As we near the end of one the most polemic transitions of power in the Nation’s history, Biden’s initial cabinet selections encompass a diverse team that has given the world a glimpse into his vision.
Let’s meet some of the picks:
Janet Yellen: Will be the first woman to serve as Treasury Secretary. The former chair of the Fed is an expert in labor markets and analysts see this pick as a “win for the establishment and a loss for progressives.”
John Kerry: Will be the first ever Special Presidential Envoy for Climate within the National Security Council. As Secretary of State under Obama, he helped negotiate the Kyoto Protocol and was the key architect of the Paris Climate Accord.
Alejandro Mayorkas: Will be the first Latino Director for Homeland Security (DHS). Mayorkas was the Deputy Secretary of DHS under the Obama administration and played an integral role in the implementation of the DACA program.
For a full list of Biden’s current selections click here.
But what does it mean?
Contrast to Trump’s America First slogan (or America Alone?), Biden’s initial picks indicate a return to multilateralism with a focus on foreign policy, internationalism, free trade, reversing immigration policies, and preparing a robust environmental package.
Yellen is known as a pragmatic economist (she doesn’t much care for politics, and Mr. Market really digs that about her). The former Fed chair brings invaluable experience as one of the key architects behind the recovery during the Obama years and is a strong advocate for using fiscal support to help drive economic recovery.
Biden is showing the world that he is putting the planet first by appointing a Special Envoy for Climate with John Kerry, who is recognized as one of the world’s most effective climate champions. While the selection of Alejandro Mayorkas for the DHS is widely seen as a victory by immigration advocates, and a stark reversal from the current administration.
It’s okay Congress, you pass a stimulus when you feel like it
If it looked like Congress made progress on passing a stimulus, rest assured it hasn’t. Despite economic data pointing to a slowing economy, the positive vaccine news puts into question how large and widespread the stimulus needs to be. As economic forces push stimulus talks in opposite directions, Congressional talks continue to stagnate and the American people continue to wait for aid.
But what does it mean?
With a light at the end of the tunnel, Congress is deliberating how much is needed to sustain the economy until the vaccine is delivered. Recent reports are providing visibility into the need for a stimulus package to get America through the winter. Retail sales are losing speed and jobless claims are rising for the second consecutive week on a backdrop of rising COVID cases and resulting restrictions on businesses. Additionally, the U.S. Labor dept. is expected to publish its monthly jobs report this week, perhaps the data will provide more impetus for the stimulus package?
Some light reading on the economy
After a slowdown of economic data heading into the holiday week, this week will provide investors with a wealth of information regarding the state of the global economy, its recovery and directionality.
Monday: Eurogroup conference will provide insight into the 2021 budgetary plans, inflation figures across the Eurozone are released, and the Organization of Petroleum Exporting Countries (OPEC) bi-annual conference will be held.
Tuesday: OPEC and non-OPEC ministerial meeting, US and European manufacturing PMIs, Eurozone core inflation figures.
Wednesday: Chinese Composite and Services PMI figures, US Federal Reserve speeches and beige book release (comments on the current economic condition) and Eurozone unemployment rate.
Thursday: ECB general council meeting, Eurozone and UK final PMI figures, Euro retail sales, US jobless claims report.
Friday: US employment report, US and Canadian balance of trade figures.
But what does it mean?
Be particularly attentive to the US employment report as it may stir a reaction over fiscal stimulus talks and vaccine deployment. While unemployment is expected to marginally improve from 6.9% in October to 6.8% it is still far from pre-pandemic levels. Analysts will pay close attention to the impact of the current COVID wave to the slowing labor market’s recovery, and focus on services-related employment figures.
Additionally, the bi-annual OPEC meeting will provide insight into how the energy market may behave in the coming months, while eurozone figures may suggest how the second COVID wave may impact the US.
What’s an investor to do?
Mr. Market is ecstatic! He doesn’t seem to care about anything other than the idea of a return to normalcy with the positive vaccine news. The Dow Industrial Average (DJIA) to an all-time high of 30.000 last Tuesday! While COVID cases continue to rise as experts warn about a further surge in the coming weeks, analysts are worried that Mr. Market could have a bit of a breakdown before the end of the year.
The rally can create some FOMO and investors looking to join the party should be skeptical about opening new positions. Take time to set stop losses for existing positions in the event of a pullback, and look for opportunities that are lagging the market, such as the most affected re-opening sectors.
For the curious investor:
Expect Salesforce (CRM) to comment on potentially acquiring Slack (WORK) on Tuesday’s earnings call. Slack already gained ~35% on the news.
Zoom will present earnings on Monday, providing insight on the company’s resiliency in lieu of vaccines spearheading a “return to normalcy” in the near future.
Biden elevating climate change to a national security concern may present an opportunity for emerging “green” technologies. Take a look at a few ETFs as an alternative long-term play (KRBN, QCLN, PBW, PZD, PHO, SMOG).
Analysts expect emerging markets to offer an opportunity to diversify risk and capitalize on the potential upside of global economic recovery heading into 2021 (see Take a Deep Breath for ideas on how to get exposure).
If you didn’t know, now you know
A brewing civil war in Ethiopia has led to a massacre of at least 600 civilians. Prime Minister Abiy Ahmed delayed elections due to the Coronavirus, and a powerful opposition party known as the Tigrayan People’s Liberation Front (TPLF) said his rule is illegitimate now. The TPLF held their own election, which Mr. Abiy said was an act of treason and cut funding and ties with the party. The Tigray administration said it was a “declaration of war” and raided an army base to steal weapons. Cue fighting between the central government and a militia of ~250,000 Tigrayan forces. Making the crisis worse, internet and telephone blackouts and restrictions on journalists and NGOs have made it difficult for the UN to monitor the situation and prevent further war crimes.
This summary only covers the surface of the conflict. To read more, click here.
What we’re reading
The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone
Growth: From Microorganisms to Mega Cities by Vaclav Smil
Some good news everyone!
Don’t keep all this goodness to yourself. Share WTM with one friend who needs to read this today! 😁
- Max & Thomas
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