As COVID-19 datapoints and scientific advances continue to surprise, the markets climb higher. Transmission rates, Remdesivir, macaque monkeys, Governor Andrew Cuomo, high-flow nasal cannulas, Pepcid, and pulse oximeters had no common thread six months ago. Now these once unrelated items can rapidly move the value of your investment portfolio higher or lower on a daily basis. While I am surprised by the +25% bounce off the March lows,
I am also surprised at the flattening of the COVID case curves as well as the daily discoveries by the science and medical community. And don’t forget the Hulk (aka Jerome Powell) at the helm of the Fed lifting up every asset that was set to fall. If the progress in science continues, there is no reason that we couldn’t easily make new highs in U.S. equities. And since 9 out of 10 of us don’t expect it to happen, it of course will.
I have taken a three-armed barbell approach to investing in the markets over the last month. With part of the portfolio, I have built stakes in companies that I believe will do better under this new post-COVID world that we will be living in. So, think about the winners from staying closer to home more, and all of the implications of eating, working, and shopping under your roof. Then, I have also built a part of the portfolio with companies which could rip higher as the economy re-emerges and consumers, companies and governments start spending again.
So, think about the healthcare and infrastructure spending winners, plus some areas of the consumer economy whose stocks I feel have been way oversold and that consumers cannot do without.
Finally, there is a part of the portfolio in which I feel the Fed and the Treasury will do everything to make sure the companies succeed and not stumble. By being everyone’s backstop, these companies will win by their clients and customers not losing. Also, I still want to own a slug of gold and the miners as a hedge against the ongoing stacking of trillions of dollars onto our annual deficit and borrowings. As for shorts, I still have my lists of companies who I think will have a difficult 12-18 months, but I am weary of shorting anything given the focus of the Fed and Treasury on rescuing everything.
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