Afternoon Audit

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U.S Stocks Rise | Trump Clashes With "Watchdogs" | Stay-At-Home Investment Opportunities
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U.S Stocks Rise | Trump Clashes With "Watchdogs" | Stay-At-Home Investment Opportunities

Afternoon Audit
Apr 8, 2020
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The Afternoon Audit

Major Market Indices Continue to Trend Upward

What Happened

  • US equities continue to rebound as indices finish in the green as of today's market close

    • DOW +3.44% | NASDAQ +2.58% | S&P 500 +3.41%

The Bottom Line

  • Since the record highs of last month, it is no secret that the COVID-19 pandemic has exploded markets with volatility

  • Since hitting it's low in late March, the S&P 500 has rose over 15% backed by few bits of fundamental data

  • On Tuesday, Goldman Sachs chief equity strategist David Kostin told CNBC, "risk to the downside is greater than the opportunity to the upside from this point where we stand today"

Market Implications

  • Some may take this as a sign of global market recovery, but the fact that little positive information has surfaced indicates this rally could be inorganic and unsustained

  • While benchmarking this market drop to the housing crisis carries inaccuracy, in Q4 of 2008 there were copious market rallies— some of which worth almost 20%

  • However, that recession did not bottom out until March of 2009

Trump's Recent Actions Against Administration "Watchdogs"

What Happened

  • Recently, President Trump fired the general in charge of overseeing the recent, congress-approved $2.2T virus rescue package, removed another who criticized his COVID-19 response, and got rid of a third who's job was to help prevent wasteful pandemic spending

The Bottom Line

  • These recent actions foreshadow how Trump plans to govern as he aims to position himself well for the upcoming election cycle

Market Implications

  • This very well could lay a runway for more, potentially reckless, spending in response to the COVID-19 pandemic

  • Given the market have, for the most part, responded well to stimulus packages, these moves signal rigid market support and more rallies in the short-term

"Stay-At-Home" Investment Outlook (update)

Current Short-Term Watch List

  • Sectors & Subsectors:

    • social media | cannabis | alcohol | e-sports & gaming | edtech | apartment REITS

  • Individual Equities:

    • Snapchat (SNAP) | Smile Direct Club (SDC) | Spotify (SPOT) | Twitter (TWTR) | Chegg (CHGG) | EA Sports (EA)

Background

  • Relevant questions pertinent to the "stay at home" thesis:

    • To what degree does the company forfeit operational efficiency with a remote work force?

    • Does the firm have tangible supply chains across the globe?

    • Is the company's customer base unaffected or even bolstered by the quarantine guidelines?

    • Has the the sector / security been wrongly hit hard, or incorrectly following the "coat tails" of the market drop?

Looking Ahead, Long-Term

  • It is also important to consider long term ramifications of these times:

    • Perhaps remote / online education is here to stay

    • Will people become hooked on the convenience of delivery services?

    • Many parents have expressed interest in homeschooling their kids full-time

    • If people remain on the "at home" wave, the automobile sector could get hit as high costs, gas prices and insurance expenses are perhaps seen as unnecessary

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