Is It Time To Buy??? - Part 8

We often talk about the affects of COVID-19 global economy, but often ignore local economies. However, because over 66% of the economy comprises of small business, we really need to assess micro economies as well to determine where the global economy is heading in the face of COVID-19.

This story kind of hit home because my in-laws live I Maine and every time my family goes to Maine we have…you guess it Lobster. However, I’m also shocked that the prices are still to high for my wallet in Maine. Needless to say, the lobster industry is getting hit hard by COVID-19.

US lobster prices are now at the lowest in four years as lobster exports to China are down 80%-90%. We often hear the growing middle class in China and consumption of this delicacy is no different. Lobster companies have been trying to divert the shipments to over parts of the world, but based on the amount China bought lobster in the past, there is now a huge glut of it with no where to go. No business means inevitable layoffs. For example, Maine-based The Lobster Co., which saw orders to Hong Kong drop from 1,000 boxes to a little over 100 boxes / week is about to lay off most of its employees.

Across the country in Seattle, different industry, but same adverse affect being caused by COVID-19. Parker Johnson an employee at the Hyatt Place in downtown Seattle said fewer than half the rooms are occupied, when normally the hotel is 80% full. Other business are having the same issue. Restaurants and movie theaters and barbers and salons all have empty chairs. Convention centers are not empty due to conference cancellation, which means no need for Uber or Lyft. Another company that runs team-building exercises for tech companies such as Amazon and Microsoft had so many cancellations last week that owner laid off more than half of his 17 employees.

Talk to anyone on the Street and the views on the market’s short-term direction vary widely. They range from those that think we are witnessing a bottoming process underway to those that believe that now is the ultimate time to buy with the major indices some 10% off the highs (though numerous individual stocks are down way more).

And of course there is an expanding camp of strategists that believe the next move is sharply lower in large part because coronavirus will crush global economic activity. To this group, the Federal Reserve’s emergency rate cut this week is not the equivalent of a cure for coronavirus and therefore isn’t a savior to stocks.

For Hercules Investment CEO James McDonald, the threat of a U.S. recession is by no means priced into stocks. And investors, said McDonald, would be wise to realize that and position their portfolios accordingly.

Source

The S&P 500 is a market capitalization-weighted index. The weight of a sector in the index is equal to the market cap of that sector divided by the total market cap of all the sectors. The top two sectors in the SPY is technology (30%) and Financials (15%) which make up almost 50% of the SPY. So if the Markets are going to bounce, the SPDR Technology ETF, XLK must hold the $83 level.

and the SPDR Financial ETF, XLF must hold the $25 level.

This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.

Posted via Steemleo