Weighing the Week Ahead: Are We There Yet?
The economic calendar is a big one, featuring several employment reports, including the official version from the BLS. The ISM manufacturing and non-manufacturing surveys provide an early look at economic changes. Despite the significance of the data, most are regarding it as old news. There is widespread willingness to look beyond the chasm of this recession and ask what it will be like on the other side. You can almost hear the chorus of voices asking,
Are we there yet?
Or might there still be a few detours on the road to Walley World?
Last Week Recap
In my last installment of WTWA, I described the need for balance between economic and health concerns. There was some discussion of this specific topic and lots of talk emphasizing both sides. I expect this to be a continuing question for all – investors or not.
The Story in One Chart
I always start my personal review of the week by looking at a great chart. This week I am featuring Jill Mislinski’s version, an excellent combination of the most important information.
The Tuesday rally was attributed to optimism about an early vaccine discovery. Friday’s early decline reflected concern about possible retaliatory measures against China. Pres. Trump’s news conference did not emphasize economic sanctions and the market recovered. Stocks rose 3% on the week with a trading range of only 3.3%. You can monitor market volatility, including historical comparisons. in my weekly Indicator Snapshot (below).
What worked? Readers seem to like this helpful depiction of what’s hot and what’s not. You can see the path of sector performance showing both leads and lags along with strengthening and weakening.
I am mostly taking some time off, which means I read and plan but do less formal writing. I am providing this update to provide the regular indicators and to highlight a very important article I found this week.
The Week Ahead
We would all like to know the direction of the market in advance. Good luck with that! Second best is planning what to look for and how to react.
We have a big economic calendar. The ISM manufacturing and non-manufacturing indexes provide one of the earliest looks at economic trends, but employment news is the big focus. Initial and continuing claims, ADP private employment, and the official employment situation report will reflect the latest available information on the plunge in jobs.
This is a lot of news, but the attention of most will be on the Grand Reopening and the spreading protests about the death of George Floyd.
Briefing.com has a good U.S. economic calendar for the week. Here are the main U.S. releases.
Next Week’s Theme
The Great Reopening has just begun, but stocks trade as if the finish line were near. Those of us who have taken a family road trip will recognize the refrain:
Are we there yet?
We are all eager to resume normal life. We all need an economic rebound before we hit the limits (perceived or real) to what government can do.
Source of the Week
If I had to recommend a single source this week, it would be What Happens Next?
In just a few minutes with this source you will learn most of what you need to know about policy responses to a pandemic. It is carefully scientific, showing the impact of changing each variable before combining them into possible solutions.
- You will learn about a possible “second wave” including how and when it can happen.
- You will be able to evaluate continuing intermittent lockdowns. Or a longer lockdown period.
- You will see solutions that combine various policies to get control of the epidemic.
- And importantly, you will see how this can be done in way that helps the economy and protects privacy.
Here are a few quotations from important segments just to provide a taste. Reading the full post will make you more of an expert than nearly anyone and also surprise you in many ways.
Why do Simulations?
There are many interesting lessons, but here is the author’s choice for #1.
We all share a desire to protect our privacy while increasing safety. Here is an entertaining explanation of how it can be done.
The presentation is both educational and fun. As is the case with any good model or simulator, you can try a range of assumptions to see what difference it makes. Enjoy!
Quant Corner and Risk Analysis
I have a rule for my investment clients. Think first about your risk. Only then should you consider possible rewards. I monitor many quantitative reports and highlight the best methods in this weekly update, featuring the Indicator Snapshot.
For a description of these sources, check here.
The technical picture has improved significantly as we would expect after the recent market rebound. I include this as an indication of the trading environment. I continue my “Bearish” rating of the overall outlook for long-term investors. I did little last week beyond adding some covered call positions.
The C-Score seems to have leveled off. It reflects is a dramatic change in underlying factors which normally provide important indications. This level is an extreme outlier that cannot readily be interpreted. Georg Vrba has paused the BCIp signal because of the extreme readings. It has done its job for now.
The Featured Sources:
Bob Dieli: Business cycle analysis via the “C Score”.
Brian Gilmartin: All things earnings, for the overall market as well as many individual companies.
Georg Vrba: Business cycle indicator and market timing tools.
David Moenning: Developer and “keeper” of the Indicator Wall.
I expect more bumps on the road to our destination. It is an interesting and important challenge: Find the best investments for the “other side.” I have seen many other investment articles this week that are trying to look ahead in this way. They are focused on what is working right now or what will work a month from now. This is a flawed approach in the absence of more information about the pandemic and the economy.
Here is a table from my last report to fellow Great Reset participants. They are all helping to collect data and ideas that we will help the entire investment community. Try your own ideas, asking where they might fit in the matrix below. For example, avoid A1 and embrace C1.
A Personal Request
One of my personal 2020 resolutions was even more emphasis on investor education – not just recommending stocks but learning how to find suitable choices. I have created a resource page where you can join my Great Reset group. You will get updates about what is being studied and can join in the process. There is no charge and no obligation, but I hope you will join in my Wisdom of Crowds surveys. I need more wise participants!
The results of our team effort will be published on a regular basis, so you will be joining me in contributing to a greater good.