June 18, 2020

Even after the 6% selloff last week, the market is back to being overbought, and we expect pullbacks to remain shallow and short lived. The HCM BuyLine® is still strong, and unless it goes negative, we are once again buying on pullbacks.  


Retail sales in May bounced up 17.7% from the April low, according to the Census Bureau on Tuesday. April had been the lowest April on record since 2013. May retail sales, at $485 billion seasonally adjusted, were down 6.1% from May 2019, down 3.3% from May 2018, and up 2.6% from May 2017. It seems people are spending their stimulus checks and their extra $600 a week in federal unemployment compensation. 


There was interesting research released by Fidelity saying that over 30% of Baby Boomers moved to 100% cash during the pandemic. Baby Boomers control 76% of $100 trillion of US household net worth, or $76 trillion. You have heard me talk repeatedly about cash build-up and it has really built up. Robinhood investors are bullish, but they are typically younger investors with less wealth, while older investors are more bearish, but with much greater wealth. The Wall Street Journal carried an article highlighting the extent that many older Americans have liquidated their stock holdings. It is a useful article that highlights how many older Americans sold stocks during the crash, but have resisted buying again, and they have sat out a 45% rally that would have helped recover a huge percentage of those losses.

COVID-19 Update

U.S. cases rise to 23,177 (+4,684) driven by rises in Texas, with 13 counties previously reporting zero cases now surging. There are 5 counties showing 100-900 cases, but it looks like Texas prison cases were counted, and it has spread at a rapid pace inside prisons. However, we think there may be double counting in Texas, as the state decided to reclassify prison cases to the county of the prison. 13 counties in Texas reported 1 day jumps from virtually ZERO in the past 7 days.  


We will know if Texas is seeing an accounting fluke based on reported cases later this week.  If they remain around 4,000 per day, like today versus previous run-rate of 1,200/day, then the state has a serious surge on its hands. But notably, daily net hospitalizations and admissions less discharges is flat and not surging. 

Certainly, cases are rising in Texas, but less organically and as written in many commentaries, Texas, California and Arizona are seeing imported case growth versus organic.  Again, we are over two weeks since Memorial Day and the protesters have basically nullified the quarantine process. With more and more states opening, there is no doubt we will see additional cases, but this is just the way it is going to have to be. No one can stay at home indefinitely.

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