by Jason Bodner

July 28, 2020

July 2014 changed my life.

I left my 14-year Wall Street career, moved my family to Florida, and started a business from scratch.

By early 2016, I was still struggling. I felt alone and adrift. Business was tough, and I needed inspiration.

So, I read a book titled 438 days. It documents a survival journey. Spanning 14+ months, Jose Alvarenga drifted in a fishing boat over 7,000 miles. The guy survived floating from Mexico to the Marshall Islands.

Jose Alvarenga, Before and After Image

His voyage began November 17, 2012 and ended January 30, 2014. The outside world didn’t change much. Now, imagine if his trip started 14 months ago – in May of 2019, ending about now.

The world has changed a lot. 2019 wasn’t a great year, for many. In my own family, we endured hospitalizations, emergency surgeries, and even cancer. Thankfully we emerged victorious. But, when the ball dropped on 2019, many people welcomed 2020 and were ready to give 2019 the proverbial finger.

Goodbye 2019 – Hellooooooooooo 2020!

How naïve we were.

There is no need to recap 2020, but had you been Alvarenga, you would have arrived to find everything different. The next five months might be equally shocking, but with that caveat, I’d like to look first at how 2020 compares to the last major pandemic, in 1918-19. Then, I’ll discuss how I think today’s crises will resolve. Finally, I’ll review what big money is doing and what it will likely do by the end of 2020.

We’re adrift in our boat… it’s a perfect time to reflect.

1918-1920 vs 2020

In 1918, the earth’s population was 1.8 billion. Spanish Flu infected an estimated 500 million and killed as many as 50 million: That’s a 28% infection rate and nearly a 3% death rate. While medically serious and seriously scary, COVID-19 currently has an infection rate of 0.2%. The CDC estimates infections potentially 10 times higher, or possibly 2%. The current death rate is only 0.01% of the world population.

Spanish Influenza versus Covid-19 Table

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

1918-20 saw us surviving both World War and the Spanish Flu, but the subsequent 1920s brought an explosion of prosperity and innovation: cars, radio, cinema, aviation, and jazz. Then came the 1929 crash.

After the 1932 bottom, stocks began their inexorable march higher. Here’s 100 years of the Dow Jones:

Dow Jones Industrial Average 100-Year Chart

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

That barely visible green dot at the upper right is the coronavirus market collapse. Yes… that little dip.

The Coming Headlines – My Predictions

The news is scary, since the news media make money through fear. If the story is happy, you won’t click the link. When rattled, you will. You see a controversial ad, you click it. News sells ads. It’s that simple.

COVID-19 is a real threat. It’s killing many people and making many more ill. But that doesn’t mean the media won’t capitalize off a scary event, which means the media will amplify and even distort the facts.

As I showed above, the Spanish Flu was 100 times worse than COVID-19 on a percentage basis, so far. That doesn’t mean it’s nothing to worry about, but I do think that some distortion occurs in all media.

Here’s how I think today’s big stories will get resolved:

  • The doom-and-gloomers expect dismal Q2 earnings, and many expect that trend to continue through Q3. But I believe Q3 results will be strong on a sequential basis.
  • America’s polarizing reopening debate will begin to settle. States will be forced to take the economy more seriously by carefully handling the school and business reopening question.
  • The stock market bears will be disappointed yet again. Year-end 2020 will find the S&P 500 somewhere between flat and +7%. Let’s take the middle and call it a +3.5% stock market year.
  • Stocks will rise on a Trump re-election. Yes, that’s a highly-charged topic, but I’m unemotionally giving you my forecast, based on precedent and the current landscape.
  • I believe a vaccine for COVID-19 arrives sooner than markets anticipate. Hundreds of firms are working on the biggest blockbuster drug of all time. Jonas Salk created the Polio vaccine and gave it to the public domain selflessly, for the greater good. (I doubt modern capitalism will do the same.)
  • The Fed will continue to support stocks. They will buy troubled bonds, ETFs and historically take equity ownership in “too big to fail” entities. I believe they might even directly purchase stocks.
  • That said, we should see one healthy and moderately scary market pullback before year-end. That will be a buying opportunity for savvy investors, big and small.

Big Money Buying in 2020

My research firm looked at which sector got the most appearances on our top-20 buy report in the last six months. Technology has been the biggest driver of market strength this year. Tech dominated, at 56%!

Map50 Sector Exposure Pie Chart

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

Healthcare was second largest at 16%. Big money is flowing into those two sectors. That should continue. Cloud computing, remote-office, and social-media drive tech commerce. Healthcare continues to collect capital in pharmaceuticals, and biopharma firms providing ongoing treatment and R&D for vaccines.

The 15-year average of daily big money signals is 63 buys and 48 sells. 2020 saw the expected daily average of 63 buys, but average daily selling spiked to 85 – a number immensely skewed by the huge selling from February 24 to March 23. During that 21-day period, we saw 10,141 sell signals, an average 482 per day!

Huge selling like this historically precedes market rips over the past 30 years, so I called a market bottom for Friday, March 20. It happened one trading day later, Monday, March 23. The S&P then rallied 49%+.

Big Money has been buying ever since. The anticipated pause came, but the sell-off didn’t. Buyers returned recently, but sellers should create a pullback before the year’s end – our buying opportunity.

I believe the best is yet to come for the U.S. We still have some unknowns to fear: an unstable political landscape, social unrest, massive unemployment, and a deadly virus threatening our health.

But, we’ve seen it before, and we’ve been through worse. Each time we triumphed.

I see the glass half full. Others see danger, sadness, and fear – a glass half empty

George Carlin Quote Image

It’s all in your perspective. George Carlin had a way to illustrate that everything is relative: “Some people see the glass half full. Others see it half empty. I see a glass that’s twice as big as it needs to be.”

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

Global Mail by Ivan Martchev
The Federal Government is Pushing Higher Inflation

Sector Spotlight by Jason Bodner
What a Difference a Year (or More) Makes

View Full Archive
Read Past Issues Here

About The Author

Jason Bodner

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

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