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May 8, 2020
Stocks – None
Macro – SPY
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S&P 500 (SPY)
The Atlanta Fed GDPNow model is forecasting a second-quarter annualized contraction of 34.9%.
Stocks advanced today, with the S&P 500 finishing the week higher by about 3.5%, and flat for May. This week, for the most part, seemed to be a reversion trade from last week’s sharp sell-off. With earnings season winding down, we should begin to get some better clarity where things stand.
From a fundamental standpoint, there are many stocks today trading at the same levels they stood at in February. Yet, their earnings and revenue estimates have fallen dramatically, making them more expensive on a fundamental basis. It is interesting with the apparent logic is that these stocks are just simply overvalued at this point. You can make that case about the entire S&P 500 at this point.
While the S&P 500 may continue to rise, the underlying fundamentals of the market, meaning valuations, simply do not support the price action.
Additionally, the price action of the LQD is something worth continuing to monitor. As prices fall, those yields are rising.
I’m also watching the health care ETF very carefully because it appears to be forming a head and shoulders pattern. Now, I have never been particularly good at calling head and shoulders patterns, but it looks like one. Health care is a huge part of the S&P 500 overall.
Anyway, all I can say is be careful, and heed the warning signs markets are sending.
-Mike
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This report contains independent commentary to be used for informational and educational purposes only. Michael Kramer is a member and investment adviser representative with Mott Capital Management. Mr. Kramer is not affiliated with this company and does not serve on the board of any related company that issued this stock. All opinions and analyses presented by Michael Kramer in this analysis or market report are solely Michael Kramer’s views. Readers should not treat any opinion, viewpoint, or prediction expressed by Michael Kramer as a specific solicitation or recommendation to buy or sell a particular security or follow a particular strategy. Michael Kramer’s analyses are based upon information and independent research that he considers reliable, but neither Michael Kramer nor Mott Capital Management guarantees its completeness or accuracy, and it should not be relied upon as such. Michael Kramer is not under any obligation to update or correct any information presented in his analyses. Mr. Kramer’s statements, guidance, and opinions are subject to change without notice. Past performance is not indicative of future results. Neither Michael Kramer nor Mott Capital Management guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment commentary presented in this analysis. Strategies or investments discussed may fluctuate in price or value. Investments or strategies mentioned in this analysis may not be suitable for you. This material does not consider your particular investment objectives, financial situation, or needs and is not intended as a recommendation appropriate for you. You must make an independent decision regarding investments or strategies in this analysis. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Before acting on information in this analysis, you should consider whether it is suitable for your circumstances and strongly consider seeking advice from your own financial or investment adviser to determine the suitability of any investment.