Joel’s Weekly Talking Points – 8/24/20

Earnings releases of note this week: Wal-Mart, Home Depot, Target, Lowes, NVIDIA, Palo Alto Networks. (not a recommendation to buy/sell/hold any of these securities)

1. Market recap: Last week, US Large Growth returned to its relative outperforming ways over US Large Value beating it 3.05% to -1.44% respectively. Most other stock indexes were down last week and the broad US bond market as measured by the Barclays Aggregate bond index eeked out a 0.27% return.
2. Data: Existing home sales increased 24.7% in July, and housing starts jumped 22.6%. Industrial production also improved, rising 3%, and retail sales rose 1.2% (2.2% with revisions). Overall, it was a fairly positive week of economic data.
3. It must be election season: The Democratic party held their (virtual) convention last week and the Republicans will hold theirs this week. I seem to be making this statement a lot lately, and I believe it is worth immortalizing here: We will not make investment decisions based on red/blue, but we will make them base on policy and the likelihood that a given policy can be passed. In my opinion if Joe Biden wins if November, but the Republicans maintain control of the Senate, little if any of his proposals will pass. Obviously this is just one of many scenarios, but we will be analyzing all of the proposals and keeping an eye on the polls to best position portfolios for whatever outcome eventually materializes.
4. Pandemic: Last week showed continued slowing of the “surge” in new cases here in the US. With any luck the spike we witnessed in June and July was “it” – as schools reopen we’ll see how this all plays out. Unfortunately we are already seeing hotspots in some areas where colleges have in-person classes. While this may not have a significant economic impact, it may certainly have a psychological impact which when fighting an invisible enemy could be worse.
5. Pullback Imminent? Bob Doll from Nuveen, who many of you know I used to work with and respect greatly, wrote in his weekly column today that they see the potential for a pullback in the coming weeks. I am always leery of saying things like this because its very easy to be wrong far more than you are right. In my opinion there are pockets of pretty rich valuations, and others not so much. While a pullback can happen at any time, it’s a fool’s errand to try and time that move. Bob and I do agree on one thing though – if there is a pullback soon it will look like a buying opportunity for some stocks that have not yet fully rebounded over the past few months.
6. Fun Fact of the Week: NOWHERE TO GO – There are 57 cruise ships either sitting at or anchored near US coastal cities waiting for the Center for Disease Control to lift the suspension of their industry. Many of the ships remain anchored at sea in order to avoid “port fees” that can exceed $10,000 a day (source: US Coast Guard).

Bottom line: The very first Presidential election I was old enough to vote in was 1992 (I voted for Ross Perot). I was fascinated with politics since the 1984 election (I was 11 years old) and have been hooked since. In the coming months I am sure we’ll hear all sorts of predictions about the elections and what will happen if “x”, “y” or “z” happens. There is plenty of historical data available that suggests it really doesn’t matter who wins in November, but that you stay invested for the long-term and that is essentially where I am. That doesn’t mean the same portfolio that works today will work in six months – there may be opportunities depending on new or adjusted policy – but we are still fighting the pandemic first and foremost.

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