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Market Strategy Weekly – October 9, 2020

Market Strategy Weekly – October 9, 2020

Summary

In addition to its grip on our politics, COVID remains highly relevant to our portfolios. Near term, it is likely that the virus and related factors will continue to dictate returns.

The economy appears to be gathering steam, and this bolsters business and consumer confidence.

In our view, the general trend appears to be improving. We see this as relatively bullish, and it adds weight to our opinion that a gradual rotation toward cyclical areas of the market makes sense.

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Financial Sector Finds In October 12 Select List

Financial Sector Finds In October 12 Select List

This week, we highlight some substantial movement in the Financials portion of the Select List. With another U.S. stimulus package on the horizon, it would be wise to keep a finger on the pulse of Index and Financial based ETFs.

Moving up two spots to claim the number one position this week is IAT, the iShares US Regional Banks ETF. Runner-up goes to Invesco KBW High Dividend Yield Financial ETF, KBWD, coming all the way up from the number five spot.

SPDR S&P Insurance ETF, KIE, fell one spot, coming in third this week. Invesco KBW Regional Banking ETF, KBWR, and Financial Select Sector SPDR Fund, XLF, rounded out the top five, respectively.

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The 1-Minute Market Report – October 9, 2020

The 1-Minute Market Report – October 9, 2020

What’s happening now, and what it may mean going forward.

A quick summary

  • The dip-buyers are now just 2.9% away from making a new market high.
  • The earnings recession continues, but forward estimates look rosy.
  • Inflation is ticking higher from a very low base.
  • Big Tech has lost some of its mojo.
  • A COVID-19 vaccine is getting closer but is not yet in sight.

The S&P 500 was up 3.8% last week

It was a strong week, up 4 out of 5 days. The only downer was Tuesday, when Trump said he was ending congressional talks regarding a second round of stimulus payments until after the election. That didn’t play well, so he reversed course on Wednesday and the market rallied.

What caught my eye on the above chart, by Jill Mislinski from AdvisorPerspectives, were the three consecutive gap openings after Tuesday’s selloff. Gap openings are not uncommon, but three in a row are. It’s a sign of bullish enthusiasm.

This is the most overstretched market in history

If you believe, as I do, that mean reversion (regression to trend) is a natural law of the market – as gravity is to physics – this chart should concern you. (It also comes from Jill Mislinski.)

The S&P 500 is now trading 132% above its long-term trend. That’s higher than it was at the height of the 2000 Tech Bubble, and higher than the 1929 peak when cabbies and shoe-shine boys were giving stock tips to their customers.

The Sector Returns

Sorted by YTD returns, this table gives a snapshot of where the money is being invested. Technology is the dominant sector at every time frame (with the exception of 1-Month), and Energy comes in dead last.

Earnings and Earnings Estimates

The chart below shows the S&P 500 (blue line, left

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Trevor Bauer? JT Realmuto? Francisco Lindor? Yankees Will Need To Be Creative This Winter After Their Latest Failure In October

Trevor Bauer? JT Realmuto? Francisco Lindor? Yankees Will Need To Be Creative This Winter After Their Latest Failure In October

Now what?

The Yankees fell short for the 11th straight season on Friday night.

And while the Rays and Astros will vie for AL supremacy, the Bombers are left to pick up the pieces as the offseason begins.

They’ve been able to field an annual contender replete with skill and talent, but haven’t been able to get over the hump in the past four Octobers.

Here’s a breakdown of what is to come from Brian Cashman and the rest of the front office:

Gary Sanchez’s Future/Catching Situation: The biggest story of the postseason was Sanchez losing his starting catching job to reserve Kyle Higashioka. He’s always been a liability on defense, but Sanchez got sent to the bench because of his inability to hit. The Yankees could finally look to cut ties with a player they’ve defended for years. If so, JT Realmuto – who looks headed out of Philadelphia with the team looking to re-route its money into starting pitching — is the obvious prize on the market, but James McCann could also make sense as a cheaper option to platoon with Higashioka. The Rays just beat the Yankees with the lesser-known platoon of Mike Zunino and Michael Perez, so it is possible.

Trevor Bauer Market/Starting Pitching Depth: Gerrit Cole proved his worth as a $324 million ace, getting his Yankee legacy off on the right foot with a gutsy effort in Game 5. But behind Cole, there are

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Something has to change after another ‘awful’ October for the Yankees | Klapisch

Something has to change after another ‘awful’ October for the Yankees | Klapisch

SAN DIEGO – The Rays’ trolling of the Yankees was getting down to business in its second hour. A dozen players in shorts and t-shirts were clustered near the first base dugout, break-dancing on the turf, smoking cigars, chugging something that looked stronger than Gatorade.

Just to drive home the point, the Rays toasted themselves as they blasted “New York, New York” and “Empire State of Mind.”

The Yankees may or may not have heard the commotion in their clubhouse. No matter: they were already traumatized, unable to do more than mumble through their Zoom interviews. Another October had ended too soon. Season over, time for the annual post mortem. The scene has become all too familiar.

Introducing Yankees Insider: Get exclusive news, behind-the-scenes observations and the ability to text message directly with beat writers

So what is it with this franchise? It’s been four years of disappointment with no end in sight. The ALDS Game 5 loss to the Rays wouldn’t have been so devastating except that it happened in 2019 against the Astros, in 2018 against the Red Sox and 2017 against the Astros. Once again, the Bombers were eliminated on one swing – Mike Brosseau’s HR off Aroldis Chapman in the eighth inning, sealing the 2-1 defeat.

Maybe it was karma stomping on Chapman, who’d buzzed that 101-mph fastball at Brosseau’s head last month. To say the Rays hated the Yankees’ closer for weaponizing his four-seamer is putting it mildly. Nothing did more to fuel that post-game party than the stupefied expression on Chapman’s face as Brosseau circled the bases.

It took nearly a half hour for the Yankees to face the media afterwards. Aaron Boone needed the time to hold an emotional team meeting. Several players wept. And by the looks of it the manager

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