Economic Outlook

The K-Shaped Recovery. A “V” For Some, Not For Most.

Economists have come up with every variation of applying a letter of the alphabet to the economic recovery. Whether it’s an “L,” a “W” or a “V,” there is a letter that suits your view. But what is a “K”-shaped recovery?

Take a closer look at the letter “K.” It’s a “V” on the top, and an inverted “V” on the bottom.

According to Investopedia:

“A K-shaped recovery occurs when, following a recession, different parts of the economy recover at different rates, times, or magnitudes. This is in contrast to an even, uniform recovery across sectors, industries, or groups of people. A K-shaped recovery leads to changes in the structure of the economy or the broader society as economic outcomes and relations are fundamentally changed before and after the recession.

Creative Destruction

Following the economic shutdown, much of the data shows strong signs of improvement. However, several different economic phenomena are driving a K-shaped recovery.

One of the more interesting aspects of the recovery has been that of “creative destruction:”

“Creative destruction is a concept in economics which since the 1950s has become most readily identified with economist Joseph Schumpeter. Schumpeter derived it from the work of Karl Marx and popularized it as a theory of economic innovation and the business cycle.

According to Schumpeter, the ‘gale of creative destruction’ describes the ‘process of industrial mutation. The process continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one’” – Wikipedia

Industries like technology, retail, and software services are leading the way in “creative destruction.” Technology companies like Apple Inc., Alphabet Inc., and Microsoft Corp. saw earnings expand during the economic recession. General merchandise retailers such as Target, Walmart, and Costco, along with online video entertainment giants Netflix Inc., Walt Disney Co., and YouTube, made sizeable gains as the economy closed. Biotech, Pharmaceuticals, and, of course, “Work From Home” firms like Slack and Zoom blossomed with online retailers like Amazon and Shopify.

However, while the “fire of necessity” gave birth to a host of new companies, simultaneously others got lost. Travel, airlines, cruises, movie theaters, traditional retailers, and real estate remain under significant financial pressures. CLICK for complete article

Trump And Biden: How The Stocks Divvy Up

Stocks are just as polarized as people these days. After all, the market is mostly run on sentiment, so it only stands to reason.

Whether you’re a Trump supporter or a Biden supporter, a die-hard Republican or no-questions-asked Democrat (because there’s no in-between anymore), stock picks tend to align with political “ideals”.

And for those who are true market players, the game is on to identify those stocks that could end up being big winners or losers coming out of the November 3rd presidential elections, assuming the market emerges unscathed as a whole.

Below are our Top 10 picks based on a Trump or Biden victory in November:

The Trumpite’s Stock Portfolio

In the event of a Trump victory (a real one, not a “refuse-to-step-down version), the stocks that could end up gaining nicely are likely to be found in the energy and financial sectors from a de-regulatory point of view, as well as among those companies who have already raked in coin from the Trump administration’s corporate tax breaks…CLICK for complete article

The Elephant in the Room

Every so often we review the latest debt numbers as tracked on the US Debt clock site. These numbers are US based, but the story is similar all over: governments have been racking up massive debts for decades and now with COVID-19, they are accelerating this practice to unprecedented levels…Click for full article.

A Good Weekend For The Media – Stephanie Levitz Pt 1

CLICK HERE to watch

A Good Weekend For The Media – Pt 2 Neetu Garcha

CLICK HERE to watch

Fed Stimulus Has Created The “Cobra Effect”

With the late week sell-off, we have updated our risk/reward ranges below. Unfortunately, the market failed to hold its breakout, which keeps it within the defined trading range. The market did hold its rising bullish uptrend support trend line, which keeps the “bullish bias” to the market intact for now.

The “not-so-bullish” aspect is that all four (4) of the primary buy/sell indicators have now tripped into “sell” territory. Such does not mean an imminent crash for the market. It does suggest upside is limited in the near term. 

Tech Extremes

Currently, we are focusing our attention on the Nasdaq, which is currently being driven by the 5-largest mega-cap names. As discussed in this week’s #MacroView, the “Tech Bubble” is back in terms of technical deviations from long-term means. As shown below, whenever the Nasdaq trades at 3-standard deviations above its 200-dma, prices always correct.

Most of the time, the corrections come very quickly. However, there are a few occasions where the payback was NOT immediate. Such lured investors into more risk before the reversion eventually came…CLICK for complete article