Written by Michael Forrester – Founder, President, and CIO of High Note Wealth
We’re back! Hopefully everyone’s February is running smoothly. At this point, more than just a few readers have crossed the ropes into 2021’s most exclusive club – Club Vax. Great news. This week did see the daily number of inoculations hit highs, so that’s moving in the right direction. More on that below, but first let’s hit the rewind on the markets and get settled in.
Before we get to some charts, it is worth noting that the risk appetite is very high out there right now. Which is simply a smart-sounding way to say people are paying crazy amounts for any and all things investable and it’s not just the stock market. Speculation is always part of capital markets, but there’s speculation and SPECULATION with a lot of signs pointing to the latter.
We definitely saw it in the GameStop saga which is one of many examples at the moment. Bitcoin has surged, art is up, and collectibles are making a comeback. Perhaps, the most unique example is someone paying over $200k for a Lebron James “digital trading card” (it may sound like a joke, but you can read more here).
This isn’t to say that the stock market is overheated, but when we see things selling for absurd amounts, and these things can only be sold to someone willing to pay a higher price, our antenna goes up. There has been so much stimulus in the system that this easily could be the result. Or, it’s simply the rotation of money not spent on vacations, dining out, etc. into various investment vehicles. All interesting and something we are monitoring daily.
Speaking of stimulus, as of Friday, word is that the House is going to approve the $1.9Trillion stimulus bill and send it over to the Senate. It will likely meet some resistance there, but it seems like we are closer to some sort of deal. So, for those who took the previous paragraph as an indication of a market top, it’s hard to believe we are in bubble territory if Uncle Sam is loading up the money cannon to shoot out another $1.9T, give or take.
As is normally the case, there are arguments to be made for the bulls and the bears alike. The more things change, the more they stay the same.
For the month of February, the US stock market has formed the famous “frowny face” pattern. While that pattern may not be found in any legitimate books on investing, it clearly looks like a frown.
It feels like forever since the bond market graced this note outside of the obligatory ‘RATES DOWN’ reminder. Quite the contrary, we are now seeing rates move up. So much so, that if one is inclined to lend money to the government for ten years, they can fetch the robust return of 1.44% (LOL). While that is still paltry in historic terms, it’s double the return that was being offered during the peak-pandemic of July so on a relative basis, its’s a big move. This is something that we will be watching closely as interest rates and inflation are directly linked. After years and years of rates continuing to drop, if they continue to move up, it will add another wrinkle to our investment strategy. We will talk more about this in the weeks to come.
With the combination of the stock market making the final leg of the “frowny face” pattern and rates moving up, we have been doing some buying in portfolios. It’s always good to see the market take a little breather, as we don’t want it tiring itself out completely in the first quarter. Technology was out of favor which provided an opportunity to add to positions.
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How Low Can You Go
Hospitalizations due to COVID, in all age groups, are WAY down. Now this is the kind of “frowny face” pattern we can all get behind.
Hit Me With Your Best Shot
We are starting to see some states creep into the double digits in terms of those with both vaccination shots. The table on the left indicates each state’s percentage vaccinated, while the right makes a case for who is doing it in the most efficient manner. It appears the District of Columba has some explaining to do… Here is the link that has the chart imbedded if the picture is hard to read.
Hurry Up and Wait
The State of Minnesota put together a fancy flow chart outlining when residents will get vaccinated. It looks good, but the details are more like ideas? As we know, it’s really hard for the states to make plans when they have no control over vaccination supply. As we approach March, it is still impossible to know when we get to the herd immunity threshold.
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