by Gary Alexander

July 14, 2020

It was a year of a deadly pandemic originating in China, sweeping the globe, killing 100,000 Americans. The police and National Guardsmen faced off protestors demanding racial justice. In the middle of all that terror was a successful manned space mission, and during it all was an endless foreign war. Several left-wing Democratic candidates failed to gain traction, to be replaced by a veteran long-time centrist Senator, running against a populist Republican appealing to a “silent majority” while running on “law and order.”

The year?

Not 2020 but 1968. I’m referring, in order, to the Hong Kong flu, urban and campus riots, the Apollo moon mission, the Vietnam War, and Senator Hubert Humphrey running against Richard Nixon.

Flu Pandemics of the Past 110 Years Image

You could say mostly the same things about 1972, but that year the most left-wing Democratic candidate won the nomination, George McGovern, running against incumbent Richard Nixon. Terrorist bombings and urban riots continued, the Vietnam War was still going on, and men were still landing on the Moon. The Hong Kong flu was long gone but otherwise 1972 seemed a lot like 1968 happening all over again.

Here’s another mystery year of killer pandemics, including a tremendous stock market crash, a fear of immigrants overrunning our shores – as well as an overriding fear of a specific drug epidemic. We saw the worst recession and unemployment rate in 25 years and a President who had lost control of his senses.

The year is not 2021 with a possible President Biden, but 1920, at the tail end of a global flu epidemic, a 46% stock market crash, “Red fever” and anti-immigrant riots, Prohibition, recession, and a president in a coma. On October 2, 1919, President Woodrow Wilson suffered a near-fatal stoke. Although he lived until 1924, he never fully recovered and his wife Edith was effectively our de facto first female president for the last 17 months of his Presidency. Wilson was paralyzed on his left side, unable to speak, blind in his left eye and partially blind in his right eye. He was confined to his bed for several weeks. Only his wife and personal doctor saw him. His condition remained hidden from the public for several months.

This was before the 25th Amendment (passed in 1967), which allowed for a Vice Presidential succession in case of an incapacity such as this. For those 17 months, Edith would review all pending legislation and executive documents. During those months, Amendments prohibiting Alcohol and allowing women to vote took effect, and America entered its worst recession and stock market crash since the Panic of 1906.

Wilson Stroke! Image

By the end of his term, Wilson was able to sit stone-faced in cabinet meetings, but he could not speak. The press covered up the president’s illness with a fake “interview” (written by Edith and her aide), for which New York World journalist Louis Seibold won the 1921 Pulitzer Prize. Some things never change.

Edith Wilson, our first de facto female President, died at age 89 on December 28, 1961, which would have been Woodrow Wilson’s 105th birthday. It was also the day she was to be have been the guest of honor at the opening of the Woodrow Wilson Bridge across the Potomac River in Washington, DC.

Today is Also Déjà vu for the 1999-2000 Dot-com Bubble

We’re also witnessing something like the 1999 tech bubble all over again. So far this year, NASDAQ is up 18.33% and the Russell 2000 is down 14.73% – a 33%-point performance gap in just six months.

The four trillion-dollar “MAGA” stocks are soaring. Microsoft is up 36.2%, is up 73.2%. Google is up 15.3% and Apple is up 31.3%.  Facebook, at $0.7 trillion market cap, is up 19.4%.

The “Fab Five” Stocks Table

Combined, these five tech giants are worth over $6.6 trillion, so they comprise about one-quarter of the market’s entire value. The top three amount to nearly $5 trillion (18% of the market). Last Wednesday those three (Amazon, Apple, and Microsoft) accounted for fully half of the entire market’s daily gain.

This chart shows the S&P 500 technology sector divided by the S&P 500, showing that the tech sector has performed 81.8% better over the last five years and about 40% better since the start of 2019.

Standard and Poor's 500 Information Technology Sector Index Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Navellier & Associates does not hold Alphabet in managed accounts but does own some Apple Computer, Amazon, Facebook and Microsoft.  Gary Alexander does not own Amazon Microsoft, Apple Computer, Alphabet or Facebook in private account.

This chart tells a similar story via ETFs. The blue line is the tech sector ETF, and the red line is everything in the S&P 500 except the tech sector, showing more than a three-fold superior gain.

Standard and Poor's 500 Ex-Technology Exchange Traded Fund Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Granted, today isn’t like the “dot-bomb” story of 20 years ago, when NASDAQ was dominated by fantasy start-ups with no earnings. These five FAANG stocks have huge cash hoards and earnings but this is still a story of a few companies dominating an entire market, with thousands of stocks on the sidelines.

You can make a case that Amazon delivers goods to socially-distanced consumers ordering goodies on their Apple computers or PCs using Microsoft operating systems with Google search engines chatting on Facebook, so these products are in demand, but there is a big wide world of other companies out there.

This is a time to be leery of “high-flyers” or “fad” stocks. Stick with Navellier’s “crème de la crème” dividend-paying long-term buy-and-hold “best of breed” stocks in a variety of growth industries.

All content above represents the opinion of Gary Alexander of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
The Fed is Moving in Mysterious Ways

Sector Spotlight by Jason Bodner
The Proven Path to Super Riches

View Full Archive
Read Past Issues Here

About The Author

Gary Alexander

Gary Alexander has been Senior Writer at Navellier since 2009.  He edits Navellier’s weekly Marketmail and writes a weekly Growth Mail column, in which he uses market history to support the case for growth stocks.  For the previous 20 years before joining Navellier, he was Senior Executive Editor at InvestorPlace Media (formerly Phillips Publishing), where he worked with several leading investment analysts, including Louis Navellier (since 1997), helping launch Louis Navellier’s Blue Chip Growth and Global Growth newsletters.

Prior to that, Gary edited Wealth Magazine and Gold Newsletter and wrote various investment research reports for Jefferson Financial in New Orleans in the 1980s.  He began his financial newsletter career with KCI Communications in 1980, where he served as consulting editor for Personal Finance newsletter while serving as general manager of KCI’s Alexandria House book division.  Before that, he covered the economics beat for news magazines. All content of “Growth Mail” represents the opinion of Gary Alexander

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