by Robert Holman | The DefensiveAdvisor.com | October 27, 2020
MARKET BULLISH … Rating of 7 (0 - 4 is bearish, 5 is neutral, 6 - 10 is bullish). My view is we are coming off an intra-year correction low. As I stated last week, tech stocks are rallying. Although Monday was not a good day, the market is likely to drift more-or-less sideways/down until the election. In the longer term, the market should be able to move up with passage of a stimulus package. The market will wait-and-see on what the proposals are in a tax-increase package, preferring to ignore campaign rhetoric.
ECONOMICS … There is limited economic news over the last week. Home sales are increasing, and housing starts and permits continue at a steady, strong pre-Covid pace. Overall, the recovery has been quite fast; quicker than most expected. But, the rise in coronavirus cases is causing concern about future economic conditions.
ELECTIONS, VIRUS and STIMULUS – The market was down hard on Monday due to concern over an increase in coronavirus cases to new US highs, raising fears of a shutdown. Under the current Administration, only local shutdowns are planned, and then probably for a month or less. On other days, the market seems to want to advance, probably due to the economic recovery.
No matter who is elected President, the market will probably have a strong upward reaction if … if … if … it appears that a new stimulus bill can be passed quickly.
Both AstraZeneca and Johnson & Johnson have resumed their coronavirus vaccine tests; their results should be in before year end. The new mRNA vaccines from Pfizer and Moderna may not be well received by a Democratic administration, since mRNA vaccines have never (at least not yet) been approved for humans, and are likely to require extensive testing for safety.
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