MidSouth Week in Review:
May 1, 2020

The S&P closed down 0.3% for the week after being up 2.7% through Wednesday.  For the month of April, the S&P was up 12.7%, its best monthly gain since January 1987.  Dividend suspensions hit record levels, including Royal Dutch Shell, who cut their dividend for the first time since the 1940’s.  After making record lows last week, crude rose to a two week high above $20 over concerns that we might later have a surge in oil prices because so much production has been shut down.  Today, Goldman Sachs turned bullish on oil, predicting Brent crude will hit $30 by the 3Q.  Pending home sales plunged 20.8% in February.  The interest rate for a 30-year fixed rate mortgage declined to a record low of 3.23% vs. 3.33% last week, according to Freddie Mac.  GDP fell 4.8% last quarter, the fastest pace since the last recession.  Jobless claims climbed to 30 million, up 3.8 million for the week.  Consumer confidence fell to 86.9, the lowest level in six years, from 118.8.  Consumer spending fell 7.5% in March, the largest decrease since 2013.  Sources:  Wall Street Journal and New York Times

 

BuzzBits

 

 

SELL IN MAY – and go away.  For the 65 years ending in 2014, the Dow has averaged a 0.4% return from May 1 to October 31 vs. a 7.5% return (15.6% annualized) from November 1 to April 30.  A $10,000 investment over the period would have returned $9,779 for the May 1 – October 31 period vs. $838,486, for the November 1 – April 30 period – Stock Traders Almanac

 

Overheard – If you see me talking to myself this week, I‘m having a parent-teacher conference …. In 20 years our country will be run by people homeschooled by day-drinkers.

 

Value vs. Growth Stocks – Over the recent years, growth stocks have outperformed value stocks, however over the past 100 years, value has outperformed growth stocks.  At the beginning of the week,  the FANG stocks (Facebook, Amazon, Netflix and Google) were selling at 60x earnings.  Studies have shown that stocks selling above 50x earnings will underperform the general market.  Why?  They are priced to perfection - Buzz

 

Masks – The state of New York now requires the wearing of masks, but they are breaking the law.  Eighteen states, including New York, have laws making it a crime to wear a mask in public.  Why?  Ku Klux Klan elimination – Wall Street Journal ….. Jet Blue is now requiring all passengers to wear masks and American Airlines, Delta and United Airlines also plan to require masks for everyone.  Home Depot and Costco are now requiring customers to wear masks.

 

Stock Market Valuation – The recent rally pushed the S&P valuation to a 19-year high, based on the forward price to earnings ratio of 20 – Financial Times

 

Ouch! – More than three-quarters of the 2,500 prisoners at Marion Correctional in Marion, OH have tested positive for COVID-19, as well as 154 staff members – THE WEEK … Nearly 70 residents sickened with the virus in a MA home for aging veterans, have died – AP …..  Men are much more likely to catch the coronavirus.  Cedars-Sinai in LA reports having 75% of their intensive care patients who are on ventilators being males.  Men in New York City are dying at two times the rate of women.  Why?  The disparity was attributed to higher smoking rates and because men are less likely to wash their hands – New York Times

 

The Crime Rate – in the U.S. has declined 41% since March 15 vs. the February stats.  Online gun retailer Ammo.com said it has experienced a 309% increase in revenue from February 27 to March 15 – USA TODAY

 

Telehealth – “I believe that telehealth can replace more than 80% of routine visits with safe, convenient, quality care” – Bill Frist, former heart-transplant surgeon and U.S. Senator ….. A recent Physicians Foundation study found the coronavirus has led to a huge increase on the number of physicians who are using telemedicine to treat patients remotely …. Ascension, with facilities in 20 states, says its online care increased nearly 2000% to about 10,000 visits in March vs. 500 in earlier months – Wall Street Journal

 

Restaurants – Most employees think its too early to open them back up.  Why?  Because they are making more being unemployed than when they were working – Buzz

 

Home Happy Hour – Retail alcohol sales in the U.S. for the six-week period ending April 11: Spirits +33%, wine +32%, total alcohol sales +26%, beer and cider +20% - Nielsen

 

Used Car Prices – have declined 11% over the past month, causing inventory to pile up, while potential customers stay home from the dealers.  New car sales declined by a record 53% in April.  With travel at a standstill, rental car companies have begun unloading vehicles from their fleets causing further suffering in demand.  Consumer Reports says that now could be a good time to pull the trigger and buy – Consumer Reports ….. Hertz misses lease payment, preparing for potential bankruptcy – Wall Street Journal ….. Tesla stock declined 10%+ today after their CEO and founder Elon Musk tweeted that their stock was too high and that he was selling all his physical assets, including his home - Bloomberg

 

 

buzz@msifund.com

 

 

 

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