You can’t get lost if you don’t know where you’re going
You can’t get lost if you don’t know where you’re going
The Curious Investor - Apr 19, 2021
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What the Market?
True to his diagnosis, Mr. Market has been acting like a manic-depressive. His mood swings with every new piece of information. To value or to growth? Booming recovery and reopening or lockdowns and contraction? These are just some of the questions on Mr. Market’s mind. Global markets have swung from depression to euphoria almost daily, and it has become sort of a nuisance. Despite limited economic data the week ahead, corporate earnings should shed some light on where we are at and on what lies ahead.
What’s driving the market?
Re-opening or locking down?: Let us just start by saying, F*CK you COVID… yeah we’re all feeling it as cases continue to rise globally as Europe, Latin America and Canada head back into lockdowns. On top of that, the J&J vaccine has been paused in the U.S. The gloomy economic headlines were enough that yields and mortgage rates ended their 7-week climb. Despite the slowdown, don’t expect the downturn to last too long, particularly with inflation speeding up in last week’s CPI report driven by the strengthening economy.
Everybody is enjoying a little retail therapy: Retail sales surged 9.8% in March (vs. 5.5% expected). The biggest increase since May last year! This is a significant economic indicator that the economic engine is beginning to churn again: accelerated vaccine rollout, laxer business restrictions, and willingness to go out and spend (a $1,400 stimmy check doesn’t hurt either). Our favorite insight from growing retail sales? Levi’s CEO commented that shoppers are buying wide leg and loose fitting jeans after emerging from a year stuck next to the kitchen. We repeat, F*CK you COVID and the Quarantine-15.
What’s an investor to do?
Investor mindset
Remember, Mr. Market tends to be volatile in nature, and these are unprecedented times much like the recovery from a World War. Mr. Market is facing his first pandemic in over a century, and he’s in a fragile state of constant fear. It’s difficult to tell if the momentum is here to stay and what may be driving it. As vaccination efforts continue globally and the economy shows signs of strength, don’t mind the inevitable speed bumps and trust your long-term view of the recovery.
Portfolio management
Ignore the media noise in an uneventful week ahead. With promising economic data and a strong earnings showing from the banks last week, look for opportunities in recovery/reopening stocks that look cheap ahead of earnings. Pay close attention to the incoming barrage of earnings this week across sectors.
Keep an eye on the economy
Absolutely nothing to watch here this week. Focus on earnings reports!
The Curious Investor:
Buddy the Elf, what’s your favorite color? It’s green, said Biden: President Biden is convening global leaders for a Climate Summit which is set to become the first high-stakes foreign policy initiative that seeks to incite cooperation with China over climate. Additionally, the U.S. is expected to announce new emission targets by 2030, and developed nations are expected to commit to increased financial commitments to help decarbonize developing economies. As climate and clean energy continue to be a major theme for the Biden presidency, banks are expected to finance and facilitate over $2.5 trillion over the next 10 years to advance climate action and sustainable development.
Sshhh, be vewy vewy quiet, I’m hunting Big Tech: The antitrust probes continue, this week in the U.S. as the U.S. House of Representatives Judiciary Committee approved a report on Big Tech companies’ behavior surrounding market competition and “abuse of power.” The 400-pager is expected to become a blueprint for legislation to rein in the market power of tech behemoths like Google, Facebook, Apple, and Amazon. The legislation aims to strengthen the enforcement of reforms on antitrust laws by making it easier to stop monopolistic deals and to provide resources to prosecutors. Expect some headwinds ahead for big tech and a shift in inorganic growth approaches in the future.
Coinbase’s Direct Listing (Disclosure: WTM is long COIN): Last week Coinbase became the first crypto player to go mainstream. True to crypto’s disruptive style, Coinbase opted to list directly rather than go through the traditional IPO process. During a direct listing the company offers its shares to a wider range of investors (retail investors) and typically forgo certain standards like holding periods. Unfortunately, as we fret, reportedly Coinbase’s executive team sold the vast majority of their shares, with the CFO selling literally 100% of her position. Stay Classy, Alesia. Definitely not a great signal for investors betting on the long-term direction of the company.
Earnings this week:
Consumer Defensive:Philip Morris, Coca Cola, Procter & Gamble, Kimberly Clark, Whirlpool
Consumer Cyclicals:Chipotle, Las Vegas Sands,,Boston Beer Company, Harley Davidson, Royal Caribbean
Financials / Payments: American Express
Others:, Johnson & Johnson, Union Pacific,Honeywell, Schlumberger
Expected Upcoming IPOs:
AI/Robotic Process Automation: UiPath (Wednesday)
WTM Watchlist
Economic Calendar:
Monday: Japanese Industrial production
Tuesday: Chinese interest rate decision, U.K. unemployment rate, ECB bank lending survey, U.S. Redbook Index
Wednesday: U.K. CPI, PPI and Retail Price index, Bank of England speech, Canadian CPI and Bank of Canada interest rate decision and press conference
Thursday: ECB Interest rate decision and press conference, U.S. Jobless claims, National Activity Index, U.K. Consumer Confidence, Japanese CPI
Friday: U.K. retail sales, Eurozone, U.K. and U.S. PMI, U.S. new home sales
If you didn’t know, now you know
While all eyes are on COVID-19 vaccination efforts, a number of medical firms are closer than ever to potentially preventing HIV. A phase 1 clinical trial conducted by the International AIDS Vaccine Initiative (IAVI) and Scripps Research found that an immune response in 97% of participants who received the vaccine. As a next step, IAVI and Scripps are partnering with Moderna to develop and test an mRNA based vaccine that uses the same approach in the COVID-19 vaccine to target HIV.
This summary only covers the surface of the conflict. To read more, click here.
What we’re vibing:
The Economics of Microfinance by Johnathan Morduch and Beatriz Armendariz. A long, deep look into the “microfinance revolution” that allowed over 150 million people to receive small loans over the last few decades. The authors do an excellent job highlighting the good, the bad, and the ugly of this nouveau finance in an easy to digest way.
Community on Netflix produced by Dan Harmon: Okay, one of us may be really late to the party, but this sitcom is hilarious! Rarely, is there a show that makes you laugh out loud by yourself. Dan Harmon’s predecessor to Rick and Morty absolutely crushes it!
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.