We’re not used to things being so… steady?
We’re not used to things being so… steady?
The Curious Investor - Feb 22, 2021
Announcements
Announcing The Curious Investor! You may have noticed we’ve changed the name of this newsletter to The Curious Investor. Nothing is changing other than some branding; this weekly release is used by our team to guide our own research and investment decisions for the WTM fund. We will continue to focus on making sense of the week’s market influencers and providing investment ideas. We’ve got some new research products in the works, so stay tuned!
Don’t forget to peep our watchlist!
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What the Market?
Mr. Market’s therapist told him to pull on his earlobes and repeat “Wooosaaaaah.” It looks like it worked; Mr. Market went home and felt relatively at peace for the first time since the pandemic struck, as investors seem to be looking to economic data in making decisions rather than online forums or random Twitter outbursts.
How come?
How’s that big package hanging? Biden’s $1.9T fiscal stimulus bill is expected to hit the House floor as early as Friday and his package may pass by next week. The main challenge to the bill, from both sides of the aisle, is the provision to raise the federal minimum wage to $15. Congress has to move quickly to secure the necessary votes as 11.4 million workers are expected to lose unemployment benefits by next month.
The Fed Chairman’s (semi-annual) speech: On Tuesday and Wednesday, Jerome Powell will provide his testimony to both the Senate Banking and House Financial Services Committees respectively. Powell is expected to acknowledge the convalescent economic data, including the improving COVID situation, and address inflationary risks and potential interest rate increases. Expect Powell’s theme to focus around moderating expectations.
What’s an investor to do?
Investor mindset:
Approach the markets with cautious optimism and take a more active approach. Strong corporate earnings results, the Fed’s dovish approach to recovery, and substantial fiscal stimulus plans have fueled the appetite for aggressive risk-taking across the full range of the investor spectrum. As the stock market continues to flirt with all-time highs, be wary of potential pullbacks as bond yields continue rising and valuations in certain sectors (e.g., tech and pharma) remain well above historic averages.
Portfolio management:
Although it may be too early for a looming pullback, it is a good time to re-evaluate portfolio allocations and rebalance. As spring edges closer and COVID cases fall nationwide, consider limiting exposure to sectors that have experienced parabolic growth over the last year and reallocating towards re-opening stocks, in what is known as a reflation trade.
Keep an eye on the economy:
Consumer Sentiment and Personal Spending: After a stronger than expected retail sales report, keep an eye out to see how consumer sentiment and spending habits may have shifted after the new administration’s takeover and stimulus package news. Note that Personal Consumption Expenditure deflator is one of the most relevant proxies for inflation tracking by the Fed. Reports will be released on Friday.
The Curious Investor:
NASA completes the longest game of BeerioKart ever to get to Rainbow Road! Just kidding, but NASA did land a car on Mars. NASA's Mars programs have led to countless innovations in everyday life, and Harvard argues that the commercial space age is here! The two main economies in play are the:
Space-for-Earth: sending goods to space for use on Earth (e.g., satellites)
Space-for-Space: sending goods to space for use in space (e.g., robotic arms to scoop samples)
As technological costs decrease, general interest increases, and space travel becomes commercially accessible to the public; expect new entrants in the space to accelerate technological developments and industry growth. Both of the space economies will benefit from the increased construction of modern space stations to support future missions. Consider exposure to adjacent companies that may benefit from the potential commercial space age, but remember this is a long term opportunity:
Broad approach: UFO, ROKT, keep an eye on the launch of the ARKK Space ETF
Investment Fund 13F filings are out! 13F filings provide valuable insight into what other fund managers and market makers are buying and selling every quarter. This week’s recent releases revealed a number of themes. Several funds invested in ETFs to add exposure to energy and emerging markets, while others built positions in healthcare and telecom and divested from financials and tech. Exciting stuff (?!)
Warren Buffett, the Oracle of Omaha and value-investing beacon is always under quarterly scrutiny. This week we learned that Berkshire Hathaway took a hefty position in telecom companies (is it growth via 5G prospects or a defensive dividend play?) and pharma, while strongly dismantling their exposure to financials. What do you think Buffett has on his mind? Join the discussion in our Slack community!
Show us what you got, Airbnb: Airbnb releases its first earnings report since going public. The hotel-slayer has spiked roughly 200% since its IPO in December and is still lauded by analysts as a strong post-pandemic play. As COVID cases begin falling, the economy continues to benefit from stimulus boosts and travel resumes, ABNB may be an early benefactor of the reopening economy. Investors will be focusing on what the company has to say about post-pandemic travel and what lies ahead. Let’s see if ABNB can get Schwifty!
Earnings Calendar:
Consumer Cyclicals: Shake Shack, Beyond Meat, Domino’s Pizza, TJX, Macy’s, Six Flags
Others: Palo Alto Networks, Square, Moderna, Nikola, Virgin Galactic, Plug Power
Economic Calendar:
Monday: Bank of China interest rate decision, U.K. Prime Minister speech, Chicago National Activity Index
Tuesday: U.K. Unemployment rate, Eurozone CPI, U.S. housing price index, Redbook Index and consumer confidence, Fed Chairman monetary policy speech
Wednesday: U.S. new home sales, Bank of New Zealand interest rate decision and policy statement
Thursday: Eurozone leaders summit, business climate and consumer confidence, Japanese leading economic index and retail sales, U.S. jobless claims, durable goods orders, and revised Q4 GDP figures
Friday: U.S. consumer sentiment, PMI and personal spending, Eurozone leaders summit
If you didn’t know, now you know
Tanzania’s health minister rejected deliveries of COVID vaccines citing that the country “has no plans in place to accept COVID 19 vaccines” because the country is “COVID-free” despite the fact that that the nation is not actively testing for the virus (you can’t have cases if you don’t test, right?). However, patients are dying at alarming numbers, which the ministry of health is calling a spike in deaths from pneumonia. Look, we know the Nile is a river in Egypt, but one has to wonder how strong de-nial flows in Tanzania?
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
Molly’s Game (book) (movie) by Molly Bloom / Aaron Sorkin is a thrilling true story of how Molly Bloom went from Olympic Skier to running Hollywood’s biggest high-stakes underground poker game.
Why Procrastinators Procrastinate from WaitbutWhy, a WTM favorite read. Warning, for those inclined to procrastinate while WFH, WaitbutWhy may be an actual detriment to your future productivity. It’s got awesome articles about anything and everything.
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.