The headlines are shocking, scary, and spreading everywhere. Here’s why—and what to do about it, states Mike Larson of Safe Money Report.
“America Locks Down from Atlantic to Pacific With Covid Raging” screamed the Bloomberg website Tuesday.
“Lockdowns, Round 2: A New Virus Surge Prompts Restrictions, and Pushback” blared a New York Times’ story.
The Chicago Tribune? Full of coverage about the pandemic and that city’s new stay-at-home order. Ditto at the Philadelphia Inquirer, which was packed with details on its hometown’s shutdown of indoor dining, gyms, museums, and more.
Yet on Monday, the S&P 500 (SPX) hit a new closing high. The Dow Industrials did, too. The Nasdaq Composite isn’t far behind.
What gives? How can we have US daily caseloads soaring to nearly 167,000...and hospitalizations hitting a record high of more than 73,000...yet markets acting so exuberant? What’s the message from Wall Street and how should you incorporate it into your investing approach?
First, big money investors are looking across the deep economic and societal valley created by COVID-19. They’re seeing encouraging vaccine news from the likes of Pfizer Inc. (PFE) last week and Moderna (MRNA) this week. And they’re thinking: “Yes, 2020 stinks. But 2021 will be better. We’ll be able to dine out, visit our parents and grandchildren, book summer cruises, and get back to some semblance of normalcy thanks to safe, effective vaccines.”
Second, they know that smaller businesses and Main Street are suffering. But they also know that Corporate America and Wall Street are grabbing market share—and benefitting from the subsidies and other aid thrown their way by Washington and the Federal Reserve.
Is that “fair”? No. Not at all. But that’s how our political and monetary policymakers chose to structure the post-COVID bailout and backstopping programs. Since the major averages are packed with larger corporations, they’re rising to reflect that reality.
Third, they know more stimulus is likely coming in 2021. If President-Elect Biden and the Democrats can flip the Senate via the two Jan. 5 runoff elections in Georgia, it will come in the form of huge helpings of fiscal aid. If they can’t, the Fed will do the heavy lifting with even more money printing.
But either way, “something” is coming. That’s because few Democrats or Republicans are advocating for tighter money and/or greater spending discipline in DC. Wall Street knows it, and it’s front-running the flood of even more cheap money.
So, what should YOU do about it? Investors and traders have been positioned in more-defensive, higher-yielding, higher-rated stocks and ETFs for some time now. Those investments are benefitting handsomely from these market trends, and it’s not too late to get on board.
Also, don’t forget to stick to the same investing principles that have worked best since early 2018. In other words, keep higher levels of cash on hand for future opportunities and risk reduction...while also maintaining greater exposure to things like precious metals and mining shares.
We don’t know how the pandemic and the ongoing vaccine trials will ultimately pan out. But if you stick with these strategies, your portfolio should perform well regardless.
Safe Money Report focuses on these kinds of stocks, which include names in the consumer staples, food and beverage, retail, and health caresectors. Visit Safe Money Report here…