Thursday, November 5, 2020

Morning Note: Don't Be the Dolt

Well, that warm, fuzzy feeling you might be having over this week's rally in stocks maybe should be tempered a tiny bit.

I'm not talking politics, I'm talking economics.

Silenced by more pressing issues yesterday was ADP's private payrolls report (the private sector's report on employment conditions), which showed 365k new jobs created in October, compared to an estimate of 643k. That's what you call a miss. Goods producers saw merely 17k new jobs created. That would be another hint that the stimulus-fueled surge off the depths may be losing some steam. Friday we'll get the government's number.

This morning's weekly initial jobless claims report came in at 751k vs a 735k estimate. 7.29 million folks remain on the unemployment rolls, which is down from 7.82 million the previous week.

There are also the special additional programs titled "Pandemic Emergency Unemployment Compensation" and "Pandemic Unemployment Assistance." The former rose to a new high of 3.96 million folks, the latter declined to 9.33 million. All told, over 20 million people remain on unemployment. 

So, yeah, like I implied in the first sentence, this week's rotation back to the previous winners may be skating on some thin ice...

Asian equities enjoyed another positive night last night, with 15 of the 16 markets we track closing higher. Europe's not complaining either this morning, with 15 of the 19 bourses we follow trading higher. Nor is the U.S.: Dow up 427 points (1.53%), S&P 500 up 1.83%, Nasdaq up 2.36%, Russell 2000 up 1.62%.

The VIX (SP500 implied volatility) is down another 8.85%. VXN (Nasdaq vol) is down 4.12%.

Oil futures are down 0.33%, gold's up 1.59%, silver's up a huge 4.45%, copper futures are up 0.59% and the ag complex is up 1.23%.

The 10-year treasury note is off a bit (yield up a bit) and the dollar is tanking, -0.82%.

Led by silver, materials, tech, Eurozone equities and banks, our core portfolio is up 1.56% as I type. Nothing's red in our portfolio so far this morning.

Keep the following in mind as you marvel at how stock prices can hold up so well against what we know to be major headwinds. (No predictions here by the way, just sayin)

"Those most adept at profiting from a particular market are often least likely to notice when the game is over, and probably the least psychologically prepared to profit from the successor market."
"There is a genius on one side of every trade and a dolt on the other, but which is which does not become clear until much later."
--Leon Levy, The Mind of Wall Street
Have a great day!
Marty




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