Written by Michael Forrester – Founder, President, and CIO of High Note Wealth
The Week Behind/The Week Ahead
On the surface, last week was a very ho-hum quiet week with the U.S. stock market ever-so-slightly positive. The major banks kicked off earnings season with reports that were about as soggy as expected, so that wasn’t the story. Under the surface we saw big moves with certain companies making large gains and others taking it on the chin which averaged out to a slight positive number.
The stock rotation was mainly out of the cloud computing and technology sectors with the beneficiaries being a random assortment of names. We saw this similar action two weeks ago with the takeaway being that the confidence or lack thereof in the reopening of the economy is a weekly, daily, moment-by-moment guess. Regardless of this ambiguity, the S&P 500 is where it was in February.
Speaking of the reopening, the narrative continues to be that things are coming back online. However, there are so many things being shut back down that it’s a series of fits and starts. California shut down bars and restaurants in certain areas again while Texas and Florida are dealing with increased outbreaks. The good news is that the treatment techniques and therapies of those affected seems to have improved, but the cases keep mounting. It feels as though this is going to be the norm until a vaccine arrives.
For those reading this week in the hopes of a presidential election deep-dive, we are sorry to disappoint. We are 105 days from the election. The adage is that the market starts to pay attention when we get inside of 90 days so we will hold off discussing until then. As a quick preview, this year has taught us that the stock market can dump and fully recover in the midst of a global pandemic, so it probably doesn’t care as much about who wins the election as we might think. More on this in a couple of weeks…
This week we will have a bunch of big names reporting earnings which is worth monitoring. Individually, the reports will be a little blasé, but there could be a collective narrative offering some insight. All forward guidance is more-or-less done for the year, but we will get a good look at how companies did during the worst of it (April) and during the reopening (June).
What Have You Done for Me Lately?
- In the High Note portfolios this week we made a couple of small adjustments. First, in retirement accounts we added contact management company, Salesforce. Above, we mentioned that technology had a bad week, so we used it as an opportunity to add a company that’s best-in-class at a price that makes sense again. Second, we did some subtle rebalancing as stocks hovered around all-time highs. With uncertainty continuing to hang heavy in the summer air, it’s a good time to make sure our house is in good order.
He Said It Better
- More than once we have tried to make this point, but couldn’t come up with the words in such a succinct manner. It’s a very important point that lies at the core of our approach.
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Moderna’s Vax Moon Shot
- Biotech company, Moderna, has been involved from the jump on trying to develop a vaccine for COVID-19. They received positive news this week in a small study that allows them to greenlight a larger, 30,000-person trial. It’s a 24/7 operation as the race for a workable vaccine continues. We are seeing a lot of speculative trading in the stocks of vaccine makers like Moderna, AstraZeneca and BioNTech. This trading action is more a case of “buy the rumor, sell the news”. As in, people are making bets on who might win the race, but as soon as it’s finished, they will be out of the stocks as the vaccine is going to be a donation for public good. Here is the WSJ story.
30 Days Late & a lot of Dollars Short
- Mortgage data continues to trickle in from the full shut down months of April and May. Unsurprisingly, early-stage mortgage delinquencies have spiked significantly. What is surprising is that this level of the 30-59 days late category is the highest since 1999. As stimulus and increased unemployment fades out this is going to roll a lot of mortgages into the 60-90-day late category right about now. This is not a bullish sign for residential prices. The hardest hit areas will be the areas of the country most reliant on hospitality – New Jersey, Florida, Vegas, etc. Read more here.
- While we are on the housing topic, the Aspen Institute released a study on the 110 million renters in America. The results are hard to read. They are not hard to interpret, but hard to imagine what damage could come from 20 million evictions across the country. National moratorium on eviction? It’s possible, but there has been very little talk on the issue from D.C. Here is the article.
The More Things Change…
- Boat shoes are back! Or maybe they never left. And maybe the work from home trend isn’t new either. Obviously, we know that working from home has been around, but we also didn’t know that Apple was seen touting the power of the home office in 1987. Safe to say that this iteration of WFH will be a little stickier as we here of numerous companies, big and small, committing to the concept indefinitely. If this is 33 years in the past what does remote work look like in 33 years? Telepathy? Finally, the hover boards Back to the Future II promised? One can only hope.
“Déjà Vu All Over Again”
- It’s a bit self-aggrandizing to quote oneself, but we are all friends here so why not. Last week we wrote, “Everyone sing along, “mortgage rates at all-time lows”! It feels like we could pencil this post in again for next week as rates give no indication of going anywhere, but down.” This week the 3% barrier has been breached – first time in U.S. history.
High Note Wealth LLC is registered as an investment adviser with the Securities and Exchange Commission (SEC). High Note Wealth LLC only transacts business in states where it is properly registered, or is excluded or exempted from registration requirements. SEC registration does not constitute an endorsement of the firm by the Commission nor does it indicate that the adviser has attained a particular level of skill or ability.
