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September 01, 2020 1:32pm
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Monday Market Movement – Will there be a Correction?

50%. That's how much the indexes are up since 2019 yet only one sector in the S&P 500 has actually grown 50% (Semiconductors) – despite $10 TRILLION worth of stimulus being dumped into the economy during that time.  Consumer Goods, Food and Banking (things the Bottom 80% actually use)  have been pretty flat while Electronics, On-Line Retail, Drugs, Investment Banking and Software are all doing pretty well for their Top 20% clientele.    But what will happen when we remove the stimulus?  Well, we may never know judging by Powell's speech last week, in which he indicated the Fed was in no particular hurry to stop dropping $120Bn per month into the economy and the Administration, for their part, are trying to finalize a $3.5Tn budget and a $1.1Tn stimulus package.  That will be on top of the $2.2Tn stimulus we already spent in the first half, which is 22% of our $10Tn, 6-month GDP.  After that spending spree (and $720Bn from the Fed), the economy grew 6.6% in Q2 – not even 1/2 of the stimulus levels. As you can see from the above chart, the travel and tourism sector is still in very rough shape (Q2 to Q2 comparisons) and, of course, Airlines are just as bad and oil companies are only just getting back to normal.  Consumer Services are still down 31.3% but Consumer Service Stocks (IYC) are up 50% from their 2019 levels because neither sales nor profits seem to matter to traders these days.   Amazon (AMZN) is 10% of the IYC, then Home Depot (HD), Disney (DIS), Netflix (NFLX), Comcast (CMCSA), Walmart (WMT), Costco (COST), McDonald's (MCD), Lowe's (LOW) and Starbucks (SBUX) make up the Top 60% - so it's a mixed bag of stocks that benefitted from Covid and stocks that lost revenues but why the index is up 50% while overall revenues are down 31.3% is beyond all logic .     IN PROGRESS    

50%.

That's how much the indexes are up since 2019 yet only one sector in the S&P 500 has actually grown 50% (Semiconductors) – despite $10 TRILLION worth of stimulus being dumped into the economy during that time.  Consumer Goods, Food and Banking (things the Bottom 80% actually use) have been pretty flat while Electronics, On-Line Retail, Drugs, Investment Banking and Software are all doing pretty well for their Top 20% clientele.  

But what will happen when we remove the stimulus?  Well, we may never know judging by Powell's speech last week, in which he indicated the Fed was in no particular hurry to stop dropping $120Bn per month into the economy and the Administration, for their part, are trying to finalize a $3.5Tn budget and a $1.1Tn stimulus package.  That will be on top of the $2.2Tn stimulus we already spent in the first half, which is 22% of our $10Tn, 6-month GDP.  After that spending spree (and $720Bn from the Fed), the economy grew 6.6% in Q2 – not even 1/2 of the stimulus levels.

As you can see from the above chart, the travel and tourism sector is still in very rough shape (Q2 to Q2 comparisons) and, of course, Airlines are just as bad and oil companies are only just getting back to normal.  Consumer Services are still down 31.3% but Consumer Service Stocks (IYC) are up 50% from their 2019 levels because neither sales nor profits seem to matter to traders these days.  

Amazon (AMZN) is 10% of the IYC, then Home Depot (HD), Disney (DIS), Netflix (NFLX), Comcast (CMCSA), Walmart (WMT), Costco (COST), McDonald's (MCD), Lowe's (LOW) and Starbucks (SBUX) make up the Top 60% - so it's a mixed bag of stocks that benefitted from Covid and stocks that lost revenues but why the index is up 50% while overall revenues are down 31.3% is beyond all logic.

 

 

IN PROGRESS

 

 

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