2 Weeks of Stock Gains: Are we entering “the period of cyclicals”? 

(11/14/2020)

Saturday

S& P 500 𝚫 T^week to a new record as investor optimism perhaps over a 90% effective Covid-19 vaccine led to a perception of ↑ hope of an economic recovery in 2021.

$ 𝚫 T^week:  outflow from cash and bonds ⓦ inflows to cyclicals, small caps, and high yield bonds.

Those investors who were on the sidelines this week

These investors rationalize that if Covid infection levels ↑over the next few weeks – which statistically I believe is highly likely – then not investing in these asset markets is smart since the facts on the ground will show ↑’d volatility reflecting investor perceptions of ↑’d short-term systematic financial risk in these markets.

Does this herald a change in investor stock exposure to: ↓ tech, and  ↑cyclicals (economically sensitive stocks)

Cyclical movement reflects a future hope or despair of a  categorical idea; certain stocks will reliably move ↑ or ↓ depending on ↑ or ↓ of GDP. 

Interest Rates / Inflation Outlook

10-year Treasury notes  Yield 𝚫 T^week  ↑’d from .83% to 0.89%.  .69% @ T ^{end of Sep} and .88% @ T ^{end of Oct}

The trend is up, suggesting that in the short-term a hedge  may possible 

Aspirational Equity Trend 

Period 1 (Past to Present): 2020 Mar: T⁻¹ to 2020 Nov: T° ↑tech

Period 2 (Present to Future): 2020 Nov: T° to Q2 2021 T¹ ↑cyclicals

This is a technical backcasting of the market trend beginning from 2020's stock market recovery point in 2020 Mar. Forecasting is a hoped-for trend for ↑ of equity prices in certain assets coincident with a post-Covid GDP recovery.

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Performance for the Week

Dow ↑ 4.1% 𝚫 T^week close @ 29479.81.

S& P 500 ↑ 2.2% 𝚫 T^week close @ 3585.15, first record close since 2020 Sep. ↑in all 11 sectors of the S& P, best-performing assets were in energy and industrials

Nasdaq ↓0.6% 𝚫 T^week close @ 11829.29 (↑tech weighting)

Dow to Nasdaq 𝚫 T^week highest since 2002

𝚫 T^week biggest loss 

2020 stay-at home stocks that have ↑’d during lockdowns: Zoom Video Communications ↓ 19%.

Tech: Amazon. com and Facebook ↓ > 5% 

𝚫 T^week biggest gain

Chevron ↑17%, best week since 2008

Walgreens Boots Alliance (pharmacy chain) ↑14%.

Russell 2000 (small caps) ↑13% 𝚫 T ^{current month}.  𝚫 T ^Nov (close of the current month was first record close in more than two years).