Video Update: As COVID Surges, Stocks Sputter
Here’s my latest video presentation. In the article below, I provide greater details. I also unveil a source of investment profits that you should tap into now.
When my toddler grandsons don’t want to face an unpleasant truth, they shut their eyes and block their ears. People who think the coronavirus crisis is waning are doing the same thing.
The virus deniers need to grow up and realize that COVID-19 continues to generate infections and deaths. At a virtual conference last Thursday, World Bank officials warned that a sustained and meaningful global economic recovery may take as long as five years because of the pandemic’s persistence.
As of this writing Monday morning, the number of coronavirus cases around the world exceeded 31 million. The United States is the hardest hit country among the wealthiest nations, with more than 6.8 million diagnosed cases and nearly 200,000 deaths.
COVID-19 cases are surging in the U.S., especially in places such as the Midwest where the implementation of protective measures (e.g., social distancing) has been tardy and uneven.
According to a new study (updated on September 16) by the Brookings Institution, overall coronavirus cases per capita are over four times higher in the U.S. than in the average high-income Organisation for Economic Co-operation and Development (OECD) country, while total deaths per capita are over twice as high.
The following survey sample includes the 25 richest OECD countries, in per capita terms, with at least 4 million people (see table).
Until the virus is under control, the U.S. economy will never properly mend and financial markets will remain vulnerable. Investors face a biological problem that’s impervious to political rhetoric and wishful thinking.
Another down week for stocks…
Autumn has officially started and the U.S. election is only six weeks away. The death of Supreme Court Justice Ruth Bader Ginsburg last week is sharpening the political partisanship. Flu season is upon us as well, which raises the dangers of COVID-19. Between now and November 3, investors must grapple with many unknowns.
Tech stocks have been overvalued and their recent declines are actually healthy. But the declines probably aren’t over.
Stocks finished last week at a six-week low, falling for the third consecutive week. Driving the downward momentum was a further sell-off among Big Tech shares (see table).
Also weighing on markets last week was the Federal Reserve’s announcement on September 16 that the overnight rate would remain near zero through 2023. Stocks swooned in response, as investors interpreted the central bank’s extreme dovishness as a sign that the economy is in long-term trouble.
The mixed retail picture…
In the U.S., consumer spending presents a good news/bad news scenario. According to preliminary estimates published by the U.S. Census Bureau last Wednesday, seasonally adjusted retail and food services sales amounted to $537.5 billion last month, up more than 30% from their April lows and 2.5% from the same period last year. That sounds encouraging on the surface, but spending levels are still far below pre-crisis levels for many retailers.
Clothing and accessories stores have been clobbered by the pandemic, with sales in the three months ended August 2020 nearly 23% below the same period in 2019. Food services and drinking establishments witnessed spending levels 19% below last year’s total. Department stores fell behind last year’s sales for the months of June, July and August by more than 16%. Many iconic retail names have filed for bankruptcy.
By contrast, certain other categories (nonstore retailers; sporting goods, hobby and book stores; etc.) have enjoyed pronounced growth rates versus 2019. As quarantined consumers change their buying habits, we’re seeing the emergence in the economy of pandemic winners and losers (see chart).
Many of the losers won’t come back, even when the virus is gone. Thousands of small businesses (e.g., restaurants and bars) are shuttered and will never open again.
The most optimistic bulls contend that the unemployment situation is improving and a vaccine is around the corner. They’re living in an alternate reality.
The Labor Department reported last Thursday that an additional 860,000 workers filed new claims for unemployment for the week ending September 12, down 33,000 from the previous week and versus 850,000 expected. The overall unemployment rate continues to fall but remains extremely high (see chart).
Thursday’s figure marked the third straight week that new jobless claims remained below the psychologically significant 1 million level, but as I’ve warned you, the Labor Department recently implemented changes in the way it calculates unemployment numbers. Unemployment is probably worse than it appears.
What’s more, an increasing number of workers are reporting that their “temporary” furloughs have become permanent.
Also divorced from reality is optimism that a coronavirus vaccine will be ready by the end of this year or in early 2021. According to the consensus of experts, it’s nearly impossible for a safe vaccine to be developed that soon. By “experts,” I mean the folks who actually hold college degrees in health science, not the personality-driven pundits on cable television.
Besides, a vaccine is useless if people won’t take it. In a new poll released Sunday, 69% of Americans said they wouldn’t have confidence in the safety of a vaccine released in 2020. So much for herd immunity. My advice is to tune out the vaccine hoopla; it’s leading a lot of investors astray.
How to make money now…
Rest assured, you can still make significant profits under these conditions. You just need to know where to look. I suggest that you look to my colleague Jim Fink, chief investment strategist of Velocity Trader.
Jim Fink isn’t like the blowhards you see on financial television and he didn’t inherit a lot of money. However, through brains and hard work, he made himself a millionaire. He’s now an investing legend who has developed an options trading strategy that’s making his followers rich. His strategy works regardless of economic ups and downs or what’s happening with the pandemic.
In a new presentation, Jim reveals how you can use his strategy to reap outsized gains, every single week. Click here for details.