Is The Bear Market Finally Coming To An End?

The 2020 Bear market came in like a grizzly bear, and the bear market ended like a cuddly teddy bear. It’s hard to imagine the market peaking in February, and then in the blink of an eye, succumbing to the violent swoon that knocked the index down 34%. There was sheer panic in the air, as experts tripped over themselves while they bolted for the exits, telling everyone it was only going to get worse.

Admittedly, I did not see the full market recovery in 2020. However, I knew the market was off too much. The worst thing folks could do would be to dump shares while the market was in freefall, and the world was dealing with a virus unlike any since the Spanish Flu.

According to Yardeni Research, there have been 21 bear markets since 1928 with nine occurring between 1929 and 1943. None rebounded faster than the Covid-19 Bear Market of 2020. Perhaps historians will place an asterisk on the bear market since there has never been this much aid and liquidity poured into the economy before.

By the same token, the economy has never been deliberately shut down. 

There is something more to this recovery than trillions of dollars coming to the rescue. The economy was sizzling when the pandemic struck, and there is something to be said about resolve. Moreover, shifting demands and trends like the housing boom and the ability to effectively work from home were unexpected. Of course, a closer examination of the rebound sees severe bifurcations between winners and losers.

Yesterday was the perfect proxy for the rebound, as there were far more decliners than advancers.

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Small Winners Circle

It is rather remarkable that almost 300 names in the S&P 500 are still in the red for the year. And not by a little bit, either. The decline is more than 23%, which is more than the average gain.

S&P 500 Winners:

• 217 average gain: +21.33%  
• The top 20 average gain: +72.21%          

S&P 500 Losers: 

• 289 average loss: -23.40%
• The bottom 20 losers average decline: -59.00%

Even the super-hot NASDAQ has had more losers than winners, although the average winner is putting in a gold medal performance.

NASDAQ Winners: 

• 435 average gain: +59.49%
• The top 20 average gain: +528.95%          

NASDAQ Losers: 

• 558 average loss: -27.34%
• The bottom 20 losers average decline: -70.76%

Ebullient

A very smart professional investor told me the market and investors are ebullient, which means cheerful and full of energy. I said, “no, that’s me.” Investor bullishness hasn’t been above 50 since January 2018.

To see the chart, click here.

It’s Been a Rocket Ship

It has been one heck of a run for the S&P Growth ETF (IVW), powered by the kind of line-up that will not be duplicated for a generation:

• Apple (AAPL)
• Microsoft (MSFT)
• Amazon (AMZN)
• Facebook (FB)
• Alphabet (GOOGL)
• Google (GOOG)
• Visa (V)
• Nvidia (NVDA)
• Mastercard (MA)
• Home Depot (HD)
• Abode Systems (ADBE)
• Netflix (NFLX)

For most of these companies, their stories and their successes are still being written. So, how much farther can these names go and subsequently carry the broader market? I am not sure, but I know they are trying to conquer the world, and probably will until they ultimately turn on each other.

Portfolio Approach

We add a new position in Technology in our Hotline Model portfolio.

Today’s Session

More positive earnings out from retailers.

Target (TGT)

·       Beat on revenue

·       Beat on eps by $1.71 over consensus

·       Comp store sales +24.3% consensus +8.6%

 Lowes (LOW)

·       Beat on revenue

·       Beat on eps by $0.80 over consensus

·       Comp store sales +34.2% consensus +16.3%

La-Z-Boy (LZB)

·       Beat on revenue

·       Beat on eps by $0.31

·       Resumes dividend $0.07

Comments and a strong performance by A.P. Moller - Maersk speaks to the global u-shape recovery and strength in the consumer. After pulling its full year guidance on March 20 due to the pandemic, the company has reinstated it, and now sees EBITDA to be between USD 6.0bn-7.0bn, before restructuring and integration costs.

Soren Skou, CEO stated, “I am pleased that we despite the headwinds, continued our track record of improving earnings and free cash flow. Our operating earnings improved by 25%, marking the eighth consecutive quarter with year-on-year improvements, driven by strong cost performance across all our businesses, lower fuel prices and higher freight rates in Ocean and increased profitability in Logistics & Services.