ROM THE DESK

We Meet Again… – Hello 3100 S&P! Nice to see you again. I want to say it’s been a while, but it really hasn’t been that long has it??!! Well you know what they say time flies in a global pandemic and ongoing period of social and civil unrest! Tell 3200 I said hello and hope to see it soon too. The prospect of seeing actual friends continues to drive the market higher, as the reopening/positive linearity narrative continues. Add in underweight positioning, FOMO/TINA/CASH (not an acronym) and the desperate search for yield, nothing is getting in the way of this market. Dunkin Donuts (DNKN +2.8%) revealing better MoM comps (ongoing theme for restaurants) and Microchip (MCHP +11.7%) pushing the semis after it not only reveals guidance, but raises it! What a novel concept. The value/cyclical theme has the bull by the horns today though but no clear trend change just yet.

Like the US Postal Service Motto… Neither snow, nor rain, nor COVID, nor China tension, nor riots in the streets will stop this equity rebound from continuing on (or something like that). Rotation is back in play once again, with Autos, Energy, and Transports leading, while FANG weakness has kept the NDQ a from making another leap toward a new ATH (for now). The narrative of the market ignoring the bad to focus on the good is becoming repetitive, but it seems two old-favorite acronyms are now back in style and being mentioned more and more as driving forces behind the market’s rise

Logistics Need Not Apply…Stocks have made their choice and they choose hope (today). US manufacturing rising for the first time in 4 months certainly helps. As does the unprecedented levels of Fed stimulus, record low bond yields and the largest S&P tech names benefitting from the effects of COVID (FANG +1.4% today, Pharma -1.4% on disappointing Gilead remdesivir results). However, stocks are going to face a multitude of uncertainty into the back half of 2020. Sadly, the worst outbreak of social unrest in decades will be one major factor. Quarantine may have loosened a bit, but new curfews are being imposed and the Nation’s Guard is required to stand watch with Trump urging “domination” of protestors. Further, The US election could be frightfully racially charged. Also, the aforementioned protests could very well spark the second wave of coronavirus. Let’s put it this way— The US was already being tested by its first impeachment since 1998, the worst pandemic since 1918 and the toughest economic conditions since the Great Depression (CNN). Now, social unrest is added to that list. And we haven’t even touched China.

Say what? Stocks have been in a defensive stance as markets wait for the 2pm White House press conference on China.  Until a few minutes ago, few knew what Washington was going to do for China’s new security law in Hong Kong.  But it looks like Trump is moving towards some sanctions on Chinese financial institutions, along with some graduate student visa limitations; neither look too impactful.  The S&P 500 continues to trade above 3000 though, and seems to be more focused on the post virus economy than on China trade… for now.  Semiconductors are outperforming thanks to Marvell’s earnings last night, but the broader tape has a defensive tone to it.  Mega Tech, Utilities and Treasuries (10-yr) are higher, versus Banks and Energy.  With the President speaking soon, and the MSCI rebalance on the close, the scope of the trading day can change over the next two hours.