The markets today, Tuesday, viewed several hours before the opening bell, look to start on a positive note, with most major North American and European indicators in the green at time of writing. (These indicators can change during the runup to the opening bell and at any time afterwards.)
Tomorrow, Wednesday, watch for a bump or dip after tonight’s first debate between incumbent President Donald Trump and challenger and former Vice President Joe Biden. Market watchers will be looking for clues. Their views of issues such as the post-COVID 19 world, if discussed tonight, will carry with them implications for the economy and the stock market.
It is reasonable to believe that market volatility will either stay at current levels or increase as the Federal election approaches but as mentioned yesterday, it is also reasonable to believe that the proverbial dust will not settle immediately after the election results are counted.
There are many strategies available for dealing with the market tumult and I will look at some of them over the next week.
One tactic is to spend more time and energy predicting businesses instead of markets, explains Gerry Frigon, President and Chief Investment Officer at Taylor Frigon Capital Management in San Luis Obispo California.
Frigon says that a focus on well-run businesses with absolutely necessary technology or other innovative products and services provide more stability than companies that have experienced what he calls ‘gamma melt-up’ or ‘excessive credit expansion’.
In this category he includes Transphorm, Inc., a pioneering microcap company dealing in power conversion products and Compugen which uses scientific modeling and computing power to predict new techniques in the development of oncology treatments.
This kind of company, he says, will pay off on innovation not ‘credit expansion and ‘market melt-ups’.
If Frigon has it right, this approach is one way of reducing portfolio volatility and I’ll discuss others in future editions.