On Stimulus, It's The GOP Versus Trump

We’ve seen this script a lot this month. The market bolts out of the gate as if the only thing that will slow it down is the closing bell - then the move stalls. The thing is the small pullback from earlier highs usually holds, and that was the case yesterday. When the market stalled early, it looked as if profit-taking overtook the fear of missing out (FOMO).

Those stay-at-home darlings took the most heat, with several tumbling more than 10% during the session. Many of these names were already well-off recent highs, including:

• Zoom Video Communications (ZM) $351 52-week high - $588
• Teladoc Health (TDOC) $197 52-week high - $253
• Etsy (ETSY) $178 52-week high - $198

Note: Netflix (NFLX) was higher all session long, and I suspect Shopify (SHOP) could turn higher at any moment.

Message of the Market

Communication services enjoyed the largest increase, and Consumer Discretionary was the second-best performer, led by brick-and-mortar names.

Communication Services

I see Communication Services (XLC) outperforming Technology (XLK) in 2021. The index just broke out from an ascending triangle stock formation, and it is building momentum.

Market Breadth

For all the changing narratives throughout the year 2020, it has been all about the NASDAQ. And those growth names have powered it to a 43.8% gain for the year. The buyers are more passionate than the sellers this year, particularly when it comes to those growth names that offset concerns about outsized valuation metrics.

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The advancers edged out decliners on the New York Stock and NASDAQ exchanges, but there was more down volume on the former. Then there is the old notion that new highs beget new highs.

Portfolio Approach

We added a new position to Communication Services today.

Today’s Session

The House passed a bill authorizing the increase in household checks in the “relief” bill to $2,000 from $600. Today, the Senate gets a bite at the apple, and it will be high drama. 

Most Republicans are against folks that are working that have never been laid-off, getting additional money that has to be borrowed. Many election mavens are saying this will hurt Republicans in the Georgia Senate runoff election.

I agree. It’s a dangerous precedent to pay folks that never lost their jobs, and it’s even worse to pay folks who do not bother to seek work. I’m just not sure how many people at $75,000 or less are in those categories.

I wish everything was rigorously tested. But there wasn’t enough time and care to make sure wealthy businesses that somehow got access to the Payroll Protection Program (PPP) funds will also have the ability to write off costs associated with keeping workers on the books. 

I think Republican Senators would be compassionate and wise to vote for $2,000.  

Message to my GOP Lawmaker Friends

Too many of the old guard GOP pundits are moving back into position and sadly this is the hill they want to die on- not providing more than $600 to people that probably lost family members, their jobs and hope during a once in a century crisis. 

They claim this makes Georgia Republicans vulnerable, but they are making those folks vulnerable selling a product that was rejected in 2016.  

Trump's election loss masked the fact the GOP saw massive gains everywhere else, but this is not the Grand Old Party of ketchup as a vegetable and not distinguishing support for free markets with support of the ultra-wealthy shipping middle class aboard.  

The fact is, both parties have mostly played the same games and over the past few decades there has been only one real winner, and it isn't the average American.

If Republican senators vote this through now, they will be able to stave off massive spending in the future that would hang over the head of future generations like the sword of Damocles.  Heck, we might already be there. 

This is a unique crisis with unique outcomes.  When the virus fades into the history books hundreds of thousands of businesses will be closed forever and millions of Americans ready to work will not have opportunities.

This is not paying people not to work but helping fellow Americans with short term boosts. 

By the way if Republicans vote for $2,000 the party would win both Georgia Senate races.