Look at the size of that package!
Look at the size of that package!
What you need to know in 5 minutes - Feb 16, 2021
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What the Market?
Mr. Market is getting tired and may be looking forward to enjoying some chamomile tea by the fireplace. After a week of relative stability, this one should be relatively quiet. Barring any surprises (looking at you WSB), this week should be *gasp* driven by data.
How come?
Biden’s Big Package: Congress is expected to vote on Biden’s 1.9T stimulus package next week. Mr. Market expects it to pass with relative ease and provide short-term support to a weak, but recovering, economy. Due to the size of his package, expect the media to pick up on inflationary risks.
Central Banks spill the deets: The Bank of England, Reserve Bank of Australia, European Central Bank, and the Federal Reserve will be issuing policy statements, minutes, and additional commentary that will provide much needed insight into the state of each economy’s pandemic recovery. A negative Fed reaction to the upcoming stimulus plan or any commentary regarding stimulus withdrawal may upset Mr. Market, although both seem unlikely at this time.
Game Stopped? This week executives involved in the GameStop mania will testify in the House (watch it here). Watch out for the Reddit community who may cause some mayhem by using the latest 13F forms being released this week detailing funds’ positions. Still confused by what happened? We got you covered!
What’s an investor to do?
Investor mindset:
Stay cautiously optimistic. There is still a lot of opportunity to enter new positions in sectors that will benefit from the coming economic stimulus package, accelerated vaccine distribution, and the new administration’s priorities.
Portfolio management:
Pay close attention to any potential market pullbacks, particularly in hot markets that have been rallying for consecutive months (e.g., tech, e-commerce, cannabis, clean energy). Stay alert and trust your picks. Remember this is a marathon not a sprint, act with decision.
Keep an eye on the economy
U.S. & U.K. retail sales: Analysts expect retail sales to uptick after a lackluster Q4 ravaged by the pandemic. With stimulus checks being delivered in early January and COVID cases falling by the end of the month, a trend reversal will be welcomed by the market. Released on Wednesday and Friday respectively.
Policy meetings: The ECB, Australian Central Bank, and Federal Reserve will release policy statements. The FOMC Minutes and Fed Governors’ speeches will hint towards its plan going forward as vaccinations advance and the economy recovers. Releases throughout the week.
The Curious Investor:
Is it a commodities supercycle? Media and investment bank chatter has picked up about a new commodities supercycle. Although it may be too early to tell, an economic recovery, large stimulus packages with dovish fiscal policies and a focus on green infrastructure may push commodity prices up in the coming years. This is a long-term play that will serve as a hedge against inflation in the short-term.
Broad approach: with exposure to indices
Inflation hedging approach: via precious metals
Short-term movements: in industrial metals and non-renewable energy
Long-term growth targets: with exposure in clean/renewable energy
Smoke it if you got one? President Biden’s election sparked the initial cannabis rally with numerous states voting on legalization. Even Mitch McConnell pledged to bring cannabis legislation to Congress. Last week, Reddit joined in and created a pump and dump scenario causing cannabis stocks to rise and nosedive. For those afraid of the current pullback, focus on the long-term value of the companies. Some analysts argue the recent rally is “getting ahead of itself” and still needs further legislative change to support the growth. However, there are still plenty of opportunities for growth across the value chain. Consider:
Speculative OTC (riskier) approach:Cresco Labs and Trulieve
Ladies first, Bumble goes public! Whitney Wolfe Herd became the youngest female CEO to take a large company public. Shares of Bumble closed 64% higher after its debut raising its valuation to roughly $8b. Herd plans to use the new capital to pay down debt and focus on international expansion, potentially via acquisitions (Bumble already owns internationally popular dating app, Badoo). Bumble’s growth in 2020 slowed down compared to 2019, likely as a result of the pandemic. Analysts will be looking to Bumble’s first earnings report to accelerate growth especially in new markets, freemium conversions, and a return to profitability as Bumble focuses on monetizing users, and navigating dating in the context of a pandemic (WTM may be following up on execution for personal reasons). Unsure sure about the new gal on the street but optimistic on the dating industry? Consider, long-term incumbent Match.com (owner of Tinder).
Disney’s got analysts feeling Goofy: (Disclosure: WTM is long Disney)Disney surprised analysts by posting a profit of $17m driven by revenue from streaming services (ESPN+, Hulu, and Disney+) while revenue from closed parks continued to slip by more than 50%. As Disney hit new all-time highs some analysts are wondering “how many times can investors get paid for the same thing?” Disney+ is still three years away from profitability and the company’s biggest source of revenue (parks and experiences) are still limited by the pandemic. Keep an eye on Disney’s ability to minimize operating losses, grow revenues and acquire new subscribers in their direct-to-consumer businesses that are currently carrying the company.
Upcoming Earnings:
Tech:Palantir, Shopify, Twilio, Dropbox, Yandex, Baidu, Globant, Roku
Cyclicals: Avis, Hilton Hotels, Cheesecake Factory, Marriott, Boston Beer Company, Royal Caribbean, Hyatt
Economic Calendar:
Tuesday: Eurozone GDP data, economic sentiment and employment report
Wednesday: U.K. CPI, U.S. Retail sales, housing market index, and Redbook index, FOMC Minutes
Thursday: ECB monetary policy meeting accounts, Eurozone consumer confidence, U.S. building permits, Philly Fed Manufacturing Index, Jobless claims, Japanese CPI
Friday: U.K., U.S., Eurozone Markit PMI reports, U.K. retail sales and consumer confidence
If you didn’t know, now you know
It’s been feeling like coup d’etat season lately. Last week, Haiti’s President Jovenel Moise announced the arrests of 23 people including senior officials and a judge – all accused of plotting a coup to overthrow the presidency. The previous president’s term ended in 2016 but after an election scandal, an interim president was appointed, and Moise’s 5-year term did not officially start until 2017. The opposition claims that Moise’s 5-year term ended in February and has asked for Moise to resign. Meanwhile protests are growing and getting a bit more violent.
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
Rule Breakers and Rule Makers by Michele Gelfand. A journey through what makes people different. A look into how individuals’' interpretation and acceptance of social norms impacts their thinking.
One Up on Wall Street by Peter Lynch. An investment classic. One Up on Wall Street provides a blueprint for investors to understand the complexities behind investment management decisions. Apparently one writer of WTM was appalled the other hadn’t read it yet, so here we are...
Looking for more?
Resources
WTM Mentions Performance Tracker
A content guide to investing (books, books, books!)
Disclaimer
This writing is for informational purposes only and the author/s undertake/s no obligation to update this article even if the opinions expressed change. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. It also does not offer to provide advisory or other services in any jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. The author/s expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.