In the latest episode of Coronavirus S.O.S. we examine the crosscurrents of unprecedented fiscal and monetary stimulus, higher global infection rates, and a rebounding stock market.
Both the Fed and Congress have thrown everything and the kitchen sink at preventing a severe economic depression.
The Fed has gone unlimited quantitative easing — the significance of this can’t be understated — during the 08-09 crisis they pumped $4 trillion into the system, they’ve now gone XXXL.
Congress is seeking to pass a nearly $2 trillion stimulus package that would fire-hose money across the economy and households, each person would receive $1,200 and each child would receive $500.
Tracking the Virus
However irrespective of the magnitude of these rescue packages the market will not be able to truly rebound until it has some level of certainty that the coronavirus itself is subsiding.
Grizzle’s Coronavirus tracker continues to point to an accelerating global infection rate – a very challenging data series.
Global Infection Rate
Spain is facing a serious health crisis, the daily rate of infection as a percentage of the population is higher than any country in the world. While in North America we are maybe just starting to see a glimmer of hope.
We only have two days of data but the rate of infection has flattened in the U.S. and Canada.
We will need to see this flattening sustained for at least 7 days to have confidence social distancing measures are working in North America.
Gold – The Comeback Kid
In SOS Volume 5 (March 12th) we said don’t count out gold and gold equities, this is the environment where gold works — when governments and central banks are throwing unlimited money to fix the system. Since March 12, gold equities have significantly outperformed the market, GDX is up 35% and GDXJ is up 17% vs. the market at 1%.
Gold & Gold Mining Stocks vs. S&P 500
Tech Stocks for the Long Run
In Coronavirus SOS Volume 5 (March 12th) we introduced the “Buy Every Dip” Basket of technology stocks: Visa, Microsoft, Adobe, Mastercard and Google. The basket has broadly outperformed the S&P 500 since we introduced it.
Quality Technology “Buy the Dip” Basket
Grizzle Software as a Service Basket
These are the stocks that we believe are the future of tech.They trade at high multiples and we felt they were real candidates to add to your portfolio if the market continued to fall: MongoDB, Atlassian, DocuSign, and Alteryx. However, since we introduced the basket (March 12th) we haven’t seen the correction we wanted, the market continues to bid up hot tech stocks.
Software as a Service Portfolio
How are the “Stay at Home” Thematic Stocks Doing?
We believed the collection of stocks that some viewed as immune from the crisis were in fact very good short candidates, given their lofty multiples and their inherent economic sensitivity: Amazon, Peloton, Zoom, and Netflix.
Zoom has clearly been the one stock that has captured the imagination of speculators. We believe this stock is very exposed and that once the coronavirus clears the company’s egregious valuation will be exposed.
Short the “Stay at Home” Portfolio
The opinions provided in this article are those of the author and do not constitute investment advice. Readers should assume that the author and/or employees of Grizzle hold positions in the company or companies mentioned in the article. For more information, please see our Content Disclaimer.