(Please get pleasure from this up to date model of my weekly commentary from the Reitmeister Complete Return publication).
Shares plummeted in September and shortly discovered itself pressed beneath the 50 day transferring common for the primary time in a number of months. Nonetheless, by the top of September a brand new rally shaped with shares breaking again above this key technical degree. And virtually gave the previous highs a run for his or her cash.
Gladly we didn’t take the bait on this rally and stayed true to the view that being aggressively bullish into the election was a mistake. Since then shares have fallen almost 5% from the mid-October excessive and broke again beneath the 50 day transferring common Monday as we come down the house stretch to the 11/3 Presidential Election.
Let’s focus on what’s within the latest brew resulting in inventory weak spot and what occurs subsequent.
First must let that Monday November 2nd is the subsequent Reitmeister Complete Return Members Solely Webinar. What an ideal time to deal with the election that sits proper forward of us. We are going to discuss all of the potential outcomes and what every contingency means for our portfolio. That means…
- What if Biden wins?
- What if Trump wins?
- What if the election outcomes are very delayed due to write in ballots?
- And worst of all, what if the election outcomes are contested by one of many candidates resulting in a prolonged authorized battle.
I’ll ponder all these prospects with specifics on the way it adjustments our buying and selling plan. So this can be a webinar you gained’t wish to miss.
(This webinar is reserved for Reitmeister Complete Return members. Study extra the best way to begin a 30 day trial to the service and take part within the upcoming webinar by clicking right here.)
Talking of the election, we acquired an odd information merchandise proper after I despatched out final week’s commentary. That’s when the FBI introduced that Russia continues to meddle in our election and should have gotten American voter information. And on high of that Iran can also be actively attempting to affect our elections. This was instantly met with weak spot within the after hours buying and selling.
Nonetheless, these losses had been shortly erased because the financial information rolled out Thursday that we acquired the primary weekly jobless claims report beneath 800,000 since March. Much more spectacular is that persevering with claims as soon as once more dropped by greater than 1 million from the earlier week. That could be a feverish tempo of individuals getting again to work that does bode effectively for the financial system, company earnings and inventory market transferring ahead.
The constructive financial information doesn’t cease there. The PMI Flash report on Friday additional confirms the enhancements within the financial system. Manufacturing was stable at 53.3 which is fairly effectively even with the earlier report. Nonetheless, it was the providers facet exhibiting probably the most positive aspects at 56.0 vs. 54.6 the final time round. Additionally New Orders was ramped up saying that the latest positive aspects are more likely to proceed into the long run.
The prepare of fine financial information saved chugging alongside this week together with Client Confidence on Thursday. Should you bear in mind from my commentary final month, it shocked to the upside in September all the best way as much as 101.3.
This studying exhibits a a lot more healthy outlook than the competing Client Sentiment report that is still beneath 90. Thus, many thought this report was due for a steep downward correction this time round. Thus, the almost equal 100.9 learn as we speak is a press release that certainly the buyer is feeling a lot better than anticipated. This additionally resonates within the Redbook Weekly Retail Gross sales report as we speak which footwear 12 months over 12 months positive aspects for six straight week.
As for manufacturing extra of the regional reviews are exhibiting wholesome indicators together with Richmond Fed Mfg. this morning rising from 21 to 29. And yesterday the Dallas Fed Mfg report got here in at 19.8 versus 13.6 final month. This corresponds with wholesome readings from many of the different regional reviews which ought to culminate in one other spectacular ISM Manufacturing survey on Monday.
Earnings season is one other clear feather within the cap exhibiting that the financial system is therapeutic quicker than anticipated. My good pal, and ex-Zacks Analysis colleague, Nick Raich does a wonderful job recapping earnings season outcomes on his web site www.EarningsScout.com. Listed below are some latest insights from nick. . Thursday e-mail from Nick Raich…maybe share extra updated knowledge.
- “83% are beating EPS estimates by one of many widest margins (+19.08% on common) that we’ve got ever measured in over 20+ years of compiling this knowledge.
- 80% have topped gross sales estimates
- These are sharply higher figures than what was reported final quarter, which clearly helps to justify the rally over the previous six months. For shares to rally extra, the Road should imagine the advance will persist.”
Most significantly is the picture under which exhibits that the anticipated loss for Q3 has been shaved from -27.22% to -12.80%. Sure, that’s nonetheless a damaging quantity, however route of change is extra necessary to Wall Road than absolutely the degree. That means the truth that the loss has been lower in half and future estimates are rolling greater is MUCH extra necessary than the present purple arrows for present company development.
But, with all this excellent news in place, the inventory market has been fairly weak of late falling again under the 50 day transferring common at 3,409 on Monday. Fell additional on Tuesday. And after hours at this second the ache prepare appears to on monitor for even steeper losses tomorrow.
The headlines will inform you that it’s largely about Coronavirus circumstances spiking across the US (and the remainder of the globe for that matter). Second, others will level to the stalemate in Washington DC on a stimulus deal.
There’s some reality in each. Nonetheless, I imagine that extra traders are realizing the election is true across the nook and there may be nonetheless a lot uncertainty there.
Do not forget that the market hates uncertainty resulting in a “promote first, ask questions later” mentality. And the truth that polls acquired it so fallacious in 2016 provides little consolation for the seemingly spectacular lead that Biden holds at this second.
On high of that, the ballot #s have been narrowing this previous week which is fairly typical coming into election day.
And on high of that’s the tens of millions of write in ballots that just about ensures a delayed election outcome. Which, sure, it extra uncertainty.
And of high of that everyone knows that the percentages of a contested election is way greater than any time in historical past. If true, it may very well be weeks or months till we’ve got a finalized election whereby the loser truly concedes to the winner.
Till that occurs…I simply can’t abdomen getting lengthy the market. And I think extra individuals are waking as much as this truth resulting in market draw back.
Gladly we by no means faltered in our view of those occasions and that’s the reason we’re firmly outperforming the market at this second (extra specifics on that within the Portfolio part under).
A formidable week of outperformance as our defensive shell scored particularly effectively on Monday because the S&P sank almost 2%. We truly made slightly revenue on the day.
In fact the inverse ETFs had been all within the plus column. But in addition GO and HELE gained floor. In reality 10 of 11 positions outperformed the S&P on the day.
However Monday was not the one spectacular session. Now we have truly been within the plus column for six straight days. And going again 2 weeks we’ve got gained a modest +0.32% all of the whereas the S&P has skidded -3.45%. That could be a good outperformance given circumstances.
(Wednesday afternoon replace: The S&P is now down over 6% the previous couple week whereas the Reitmeister Complete Return portfolio is actually break even due to the defensive strikes made within the portfolio).
What To Do Subsequent?
Proper now my Reitmeister Complete Return portfolio has appropriately been positioned for shares to come back off the September highs and head decrease into the election. This has led to a extra conservative portfolio combine that has properly outperformed the previous couple months.
Here’s a breakdown of the 11 positions at the moment within the portfolio:
5 GAARP Shares (Development At A Cheap Value) which can be effectively positioned for the coronavirus financial system.
3 Inverse ETFs to mop up positive aspects because the market is heads decrease into the election
2 Treasured Metals positions as a result of when each world authorities is throwing cash out of a helicopter it creates a bullish surroundings for gold and different treasured metals.
1 Inventory Sector ETF of a gaggle more likely to outperform. This was added on Wednesday October 21st and already breaking greater.
If you need to see the present portfolio of 11 shares and ETFs, and be alerted of when it’s time to get 100% bullish as soon as once more, then think about clicking the hyperlink under.
Wishing you a world of funding success!
…however everybody calls me Reity (pronounced “Righty”)
CEO, Inventory Information Community and Editor, Reitmeister Complete Return
SPY shares had been buying and selling at $329.99 per share on Wednesday afternoon, down $8.23 (-2.43%). Yr-to-date, SPY has gained 4.00%, versus a % rise within the benchmark S&P 500 index throughout the identical interval.
Concerning the Creator: Steve Reitmeister
Steve is best identified to the StockNews viewers as “Reity”. Not solely is he the CEO of the agency, however he additionally shares his 40 years of funding expertise within the Reitmeister Complete Return portfolio. Study extra about Reity’s background, together with hyperlinks to his most up-to-date articles and inventory picks. Extra…