WEEK AHEAD: NOVEMBER 16

Short Description

There’s been a shift in leadership within stock markets – high-flying tech stocks have taken a backseat to real-world value stocks. I discuss whether this new trend can last and rundown highlights from the economic calendar. Thanks! Rich

Video Script

The vaccine stock market rotation - THE WEEK AHEAD (Nov 16-20, 2020)

Hi everyone, I’m previewing the week ahead in markets and I want to talk about the record highs in stock indices reached last week – and specifically why the gains were not led by tech stocks this time but by sectors like banks and cruise lines. I will also rundown this week’s economic calendar – which includes a lot of retail sales and inflation data from across the globe.

Since I mentioned cruise lines there – an industry that has been really hard hit by the pandemic – I thought it’d be fun to tell you that cruise company P&O introduced the first commercial passenger cruising services in the year 1844, sailing from Southampton England to destinations such as Gibraltar, Malta and Athens. Cruise lines have been going for almost 200 years, and although can’t say I’m a big user of them - I certainly hope they are around for another 200!

If you enjoyed my brief history of cruise lines, please click the like button - it really helps us spread the word about these videos!

We kick off with China industrial production and retail sales on Monday. The US follows with the same set of data– retail sales and industrial production on Tuesday. We have CPI data from Europe, the UK and Canada followed by Australian unemployment on Thursday and UK retail sales on Friday. The overarching question across this economic data is how well the economic recovery is going- especially the health of the consumer – and how much it is being hurt by new national lockdowns.

So last week we saw matching record highs for the Dow Jones, S&P 500 and the Nasdaq indices. Do you remember my video from the week of August 31 giving reasons why the Dow can hit a record high? Well now it has. 

A big part of the reason why the Dow participated this time was the news from Pfizer that its COVID-19 vaccine was 90% effective. The logic goes that once a vaccine is available to the most vulnerable and key workers like doctors and nurses, there is much less need for lockdowns to prevent the spread of the virus. People can go to work and travel as normal and estimates are that around half way into 2021 the vaccine will be available to most people.

Ok how does that affect the Dow Jones index and tech stocks? Because the Dow is mostly made up of industrial and ‘real world’ stocks. These stocks performed the best last week but have performed very badly this year. That’s because the earnings of these companies have been much more negatively affected by lockdowns and travel bans that stop people and businesses using their goods and services.

The stocks that performed the worst last week are those that have done the best this year, which are technology and the so-called ‘stay home’ stocks like Zoom – the internet video conferencing service and Peloton - the home workout equipment and streaming service. Some of these stocks are up multiple hundreds of percent this year!

So is the party over for tech stocks? Well last week was a sign that it might be but nothing is for certain. Many European countries are already heading into second lockdowns and there are calls for the same to happen in the United States, which feels more likely under a President Biden. If there’s a double dip recession coming, it might be a bit too soon for this ‘rotation’ from growth to value stocks to happen.

Right thanks everyone, good luck trading this week and make sure to subscribe to our channel so you don’t miss the next video.