How well prepared are you for this market?

I’m sure last week’s action scared the daylights out of many of you. Guess what…this thing is far from over.

Sit up, right now, and pay attention, or you could get run over!

Strap on your seat belts kids, because things are about to get ugly!

You thought the worst was over?

Here’s some things to give you some perspective:

• Bonds haven’t rallied like they did Friday since the Great Recession.
• The last time the Fed did an emergency rate cut was the beginning of 2008.
• The VIX hit a high of $54.39. That’s higher than any other time since 2009.
• The Dow had the largest single-day dollar drop ever recorded on 2/27/2020 and set 5 of the top 10 largest single-day declines in its history these last few weeks.
• There’s now talk about canceling the Olympics after they canceled the SXSW festival.

I could keep going, but I’m sure some of you already passed out.

Let’s start this week’s jump by looking at ramifications of this global pandemic, starting with the Democratic Primary.

Can’t Hold a Good Joe Down

Despite anyone’s political leanings, markets (and especially health insurance stocks) feared Bernie Sanders.

Super Tuesday left Joe Biden in a much stronger position to win the Democratic nomination. That led to United Healthcare pitching one of its largest one-day gains on Wednesday.

UNH Daily Chart

Democratic establishment figures consolidated around Biden after his stunning victory. With Elizabeth Warren’s dropout (and equally as impactful non-endorsement), the likelihood of a Biden nomination looks much brighter.

Whether markets view him as better than Trump is tough to say given the overarching Coronavirus storyline.

 

Vote No For the Coronavirus

Unfortunately for the Trump administration, much of this event is out of their hands. Still? They aren’t getting positive reviews from the market.

From a bungled CDC testing rollout to erratic messaging to an undersized request of funds from Congress, investors may see Trump as pro-business, but they lack faith in his ability to handle this crisis. The sidelining of Health Secretary Alex Azar for Mike Pence wasn’t viewed favorably either, and almost a tacit admission of ineptitude.

Under normal circumstances, incumbent presidents hold an advantage that is only amplified by a strong economy. Presidents get credited and chastised for far more than they can actually control. In this case, Trump may shoulder the blame for the potential downturn, fair or not. With that being his strongest selling point, it cuts the legs out from his best message to voters.

It also highlights an issue Democrats leveraged to win back the house in 2018 – healthcare. How much this becomes a focal point depends on much more than I can predict at the moment.

Travel & Leisure Implosion

The last time I saw airline stocks fall this hard was after 9/11. I’ve been watching the JETS airlines ETF for signs of a potential bottom in these stocks. The ETF saw a third of its value wiped out since February.

JETS Hourly Chart

Stocks like Six Flags (SIX) are half what they were months ago. Hotel stocks took it on the chin. The only ones benefiting here happen to be grocery stores that are seeing a run on everything from canned goods to paper towels.

Just check out the performance of Kroger (KR) supermarkets.

KR Hourly Chart

That looks more like a momentum stock than a grocery chain that’s been around longer than I have.

My Take – Perception Is Reality

Long before the pandemic hit, markets had inflated beyond reason. We stood at historically high valuations and low volatility. At some point things needed to pullback. The Coronavirus was the catalyst. Keep in mind, we had a pretty good sense of the problem for weeks, and yet the market climbed that wall of worry.

What we’re seeing now is ‘The Great Unwind.’ This isn’t a crash, nor do I expect it to become one. Markets are, in fact, rather orderly. There isn’t any issues with liquidity, Rather we’re seeing a lot of money move out of positions, whether by choice or by force.

The problem comes down to three main questions:

1. How far will it spread?
2. How long will it take?
3. How long until things return to normal afterward?

Right now it looks like this disease will become a part of normal life at some point. If that’s true, all our prevention measures do is delay the inevitable. I certainly hope that it flames out like other past pandemics.

For now, I see a lot of market uncertainty for the remainder of the summer and the year. 

Man The Battle Stations

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Expected earnings dates listed in (…)

Stocks I want to bet against…

TLT (none), ZM (Mar 4), COST (Mar 5)

Stocks I want to buy…

MJ (none), UNG (none), XLE (none), WDAY (May 26), PTON (May 6), TWLO (May 3), UVXY (none), PBR (??), OLED (May 7), V (Apr 22), IRBT (Apr 28), SHAK (May 7), DPZ (May 20), GOOGL (May 4), CVNA (May 13), COST (Mar 5), CMG (Apr 22), NFLX (April 21), AMZN (Apr 23), AMD (May 5), UBER (Jun 4), GDX (none), ROKU (May 13), MTCH (May 5), TDOC (May 5), LK, WORK, ZS, AYX

This Week’s Calendar

Monday, March 9th 

• Major Earnings: Stitch Fix Inc Cl A (SFIX), Synchronoss Technologies Inc (SNCR), Matinas Biopharma Hldgs Inc (MTNB), Thor Indus (THO),

Tuesday, March 10th

• 7:45 AM EST – ICSC Weekly Retail Sales
• 4:30 PM EST – API Weekly Inventory Data
• Major earnings: Akebia Therapeutics Inc (AKBA), Workhorse Group Inc (WKHS), ChemoCentryx Inc (CCXI), Cloudera Inc (CLDR), Clean Energy Fuels Corp (CLNE), Vivint Solar Inc (VSLR)

Wednesday, March 11th

• 7:00 AM EST – MBA Mortgage Applications Data
• 8:30 AM EST – Consumer Price Index February
• 10:30 AM EST – Weekly DOE Inventory Data
• Major earnings: Calithera Biosciences Inc (CALA), Dynavax Tech Corp (DVAX), PDL BioPharma Inc (PDLI), Sientra Inc (SIEN), Zagg, Inc. (ZAGG), Express Inc (EXPR), United Natural Foods (UNFI)

Thursday, March 12th

• 8:30 AM EST – Weekly Jobless & Continuing Claims
• 8:30 AM EST – Producer Price Index February
• 10:30 AM EST – EIA Natural Gas Inventory Data
• Major earnings: Adobe Inc (ADBE), Adma Biologics Inc (ADMA), Broadcom Inc (AVGO), Bellicum Pharma Inc (BLCM), DocuSign Inc (DOCU), Domo Inc (DOMO), Flexion Therapeutics Inc (FLXN), Gap Inc (GPS), Oracle Corp (ORCL), Ulta Beauty Inc (ULTA), Uniti Grp Inc (UNIT), ViewRay Inc (VRAY), Slack Tech Inc (WORK), Zuora Inc (ZUO), Agenus, Inc. (AGEN), Dollar General Corporation (DG), Lexison Pharmaceuticals Inc (LXRX)

Friday, March 13th

• 8:30 AM EST – Import Prices February
• 10:00 AM EST – University of Michigan Sentiment March
• 1:00 PM EST – Baker Hughes Rig Count
• Major earnings: The Buckle Inc (BKE), GoGo Inc (GOGO), Kirkland’s Inc (KIRK)