As mentioned in previous blog, Sept started with its reputation and markets did had some volatility with Nasdaq near correction territory (10% down from peak). In a way its healthy so that some froth is out from market and newbie day-traders can get the lesson that markets do go down also! Apple is back below historic 2 trillion market cap and Tesla is back to pre-split "reasonable" valuation. More on this later...
Sept also means start of football (American football...not to confuse with Soccer) season. Normally fall weekends are filled with college football on Saturday and NFL on Sunday. Unfortunately most of the college football is shut down (for legit reasons... no in-person classes..so it doesn't make sense to have in-person games). NFL is taking lessons from NBA bubble season and starting games with almost no crowd. Let's see how it plays out. At least there would be something to watch on Sunday afternoons and Monday/Thursday nights and follow the teams. This year Fall also brings delayed season of Cricket's most watched franchise (maybe world's most watched franchise of any sports) Indian Premier League (IPL). Normally it happens in Spring but due to COVID-19 pandemic, it got moved to Fall and is being hosted outside India (in UAE). While same enthusiasm will be missing, it's always fun to watch IPL games. Personally I am rooting for Mumbai Indians to continue their winning streak.
But the biggest game in the world for next 8 weeks would be American Presidential Election. It has entered in penultimate phase after nearly 2 years of primaries and usual election drama. This election is going to be one of the most important election in recent history and will decide the fate of America for next decade. The candidates could not be more diametrically opposite (other than their age and race) in terms of policies. Recent polls give clear advantage to Joe Biden but in battleground states, race is narrowing. Is absence of any October surprise, US will have change of guard in Jan 2021. But polls have been completely wrong in 2016. So one can never know till all the votes are counted. This time declaration of winner could take weeks due to higher than normal voting by mail. In 2000, results were declared after US Supreme court decision in mid-Dec. During that time, S&P went down by 5%
So how would markets behave till end of year? Sept/Oct would be choppy as we have many unknowns like Q3 earnings, economy opening, vaccine progress, holiday season spending, uncertain elections and frothy markets. On top of that, everyone from big players like Softbank to Robinhood day-traders are playing options. All of these are going to add extreme volatility and potential of big gains or losses. So my advice would be to be disciplined and buy stocks of quality companies which have real products people love (e.g. if you have to buy EV player, buy Tesla and don't even touch Nikola which does not even have a single vehicle on road and shorts are circling the company stock). How times have changed....Warren Buffet who likes to buy only stocks of companies which make real products which he can touch or experience is buying stock of Snowflake (symbol: SNOW) in IPO. The Oracle of Omaha had finally acknowledged that software and cloud are real businesses and its time to participate in companies which are building 21st American Century.
Congratulations to Citibank for appointment of first woman CEO of major American Bank. Hopefully 2020 would set the course for first woman President of USA before the decade is over.
/Shyam
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