This week the markets are experiencing a degree of volatility stemming from competing outlooks for the reopening, competing interpretations of influencing markets such as interest rates and energy and competing outcomes of external events. Outlooks are under scrutiny resulting from recent European countries resuming lockdowns in the face of rising cases of the variants of the virus. Such concerns are yet to influence the domestic economy, but time will tell. The rise in interest rates and energy, are slowly losing steam as even interest rates can become overbought, and the response has seen trading in the correlating sectors as being more speculative than investment. And the narrative that surrounds external events refers to the troubling recent meeting between Chinese and American dignitaries and the Administration joining some Euro initiated sanctions over a 1200 mile natural gas line connecting some countries directly to Russian reserves. Too much Russian dependence or not consistent with environmental goals? Everything I’ve mentioned has created an environment that strongly suggest the need for patience and careful interpretation.
Patience is especially important in
the technology sector. The familiar names have well underperformed those that
are more important to the near term reopening than the long term return to
normalcy. Admittedly, I’d be more comfortable if they paid dividends for my
patience, but it’s difficult to ignore the realities associated with the
consumer faced with choices that won’t simply be about taking a cruise at the
expense of ordering something on Amazon (AMZN). The give up on our end
is our core holdings, those that are unlikely to go away anytime soon, and the
reopening companies that have no relative outcome of their stock prices until
we start to see earnings next month. If they’re good, then I ask, what then?
Lastly, it’s important to consider
that the quick turnaround by countries such as Germany to lockdown in the face
of rising cases strongly suggests, in my opinion, that health concerns could
linger longer than most of us, even vaccinated, may expect. This is why the
overall allocation of accounts are focused on Consumer Discretionary,
Healthcare, and Industrial sectors, where for now one has to carry the others
in the current market activity and which, in my opinion, will eventually see
price growth from all. For now, the technical’s are overbought, the Algochums
and Pindudes are the busiest investors/traders and patience, and cash is the
best place to be to best preserve the gains made since the markets collapsed
one year ago.