November 22, 2020
Weekly Market Outlook
By Keith Schneider
As the outcome of the presidential election is still being contested and the virus spreading to its highest levels since the initial outbreak, US equity markets mostly shrugged off this uncertainty with small caps gaining nicely on the week. This was partly spurred on by positive news regarding vaccines.
Looking deeper under the hood, sector rotation out of utilities and consumer staples into retail and energy (each rallied over 5% for the week) was clearly a positive, confirming recent price action.
However, longer term valuations of US equities verse the US GDP are at historic levels much like 1928, 1999, and 2007, suggesting a bubble. This bubble according to John Hussmann is indicating horrible returns for stocks (worst ever) over the next decade.
Of course, bubbles can last a lot longer and run much deeper than anyone anticipates and hence our focus on risk control to both leverage the upside while reducing drawdowns.
The highlights of this week’s market action are the following:
Check out this week’s video as we cover an interesting trading pattern which should give us a good heads up for determining the next short-term direction of the markets.
Best Wishes for your trading.