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 MARKETMAIL EDITOR FOR SECTOR SPOTLIGHT

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

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.