The Shift from Growth to Value & Cyclicals Continues – Try the Italian Sweet Sausage Stuffing

*Today is Veteran’s Day in America – It is a day we celebrate the men and women that answer the call to duty and many times pay the ultimate price for that call.  As many of you know – My wife and I are deeply committed to our military via the Headstrong Project (getheadstrong.org) – not because we are veterans, but because of my own 911 experience. (that’s another story) …

In this time of covid 19, a time that has been completely upended and disrupted by this virus – it seems like the world has come to a halt – and for many it has – Including our veterans.  October 19th would have been our annual gala fundraiser in NYC – last year we (Headstrong) had over 900 people at the Chelsea Pier 60 and raised more than $2.3 million for mental healthcare for our men and women in uniform that suffer from PTS. This year – like many others – we have gone virtual (and viral) in an attempt to help our veterans. We are in the middle of our “No Minds Left Behind” virtual campaign – it is a play on the “No MAN Left Behind” mantra that our military is committed to. The campaign goes on to year end and you can consider donating here at 

Kenny & Evelyn Polcari Champions URL: https://e.givesmart.com/events/iJP/c/:apjc756Rq54/

Tonight – Headstrong is hosting the GRATITUDE Headstrong Event – A night to honor and remember those brave Americans that answered the call.  Click on the link to register and attend – It will be hosted by NBC’s Harry Smith and will also feature Jake Gyllenhaal, Seth Meyers and a host of others. It is sure to be a must see and must attend event and in fact would be an event that you watch with your family – so that your children begin to understand.  

GRATITUDE VIDEO – https://e.givesmart.com/events/iJP/

Thank you in advance for all of your support and when you see a veteran today – be sure to say Thank You and let them know how important they are to the very fabric of our nation.

On to the markets…

Energy – XLE +3.24% yesterday and up 17% this week, Basic Materials – XHB +2.3% yesterday and +14% in one week, Industrials – XLI + 1.8% yesterday and 15% in one week and other cyclicals (think BA+5,3%, MMM +3.3%, RTX + 4.4%) continue to power the market higher…Value stocks following in kind – (think JNJ +1.5%, VZ +2.1%, UNH +1.05%, PG +1.65%) … While Growth – Big Tech (think AMZN – 3.4%, GOOG -1.3%, FB – 2.2%, MSFT -3.3% and Work From Home Stocks (think ZM -8%, TWLO -2.8%, AVGO -3.3%, etc…) keep getting punished as investors shuffle the deck.

Both the Dow and the S&P have now outperformed the tech heavy Nasdaq as investors look for new ways to capture opportunity and value in the market and this should not be surprising to anyone considering where we are in the cycle. Now that does not mean that growth is out – it is not, it’s just that there is a shift in thinking and a shift in opportunity. So while growth will always a place in your portfolio, value will have a place as well. A new sub-sector that has been born out of this mess is what CNBC’s Brian Sullivan is calling the GOAT stocks – (Get out And Travel) – these are hotels, airlines, restaurants, RV’s, Auto’s – anything that you can think of when you travel… and they have also been way outperforming and this is a direct result of the latest news out of PFE.

If you were asleep on Monday – PFE announced very positive vaccine results – results that have the ability to control and prevent covid 19 and that lit the market on fire – sending investors into cyclicals, value and GOAT names while at the same time kicking those ‘growth stocks and WFH stocks in the gut. In addition – we can expect more good news out of Moderna, Regeneron, Gilead, JNJ, AstraZeneca in the weeks ahead and that is causing the Biotechs (XBI +1.5 yesterday) to surge 10% in the last week… As the news continues to get better – then expect that re-pricing we have speaking about in different parts of the market… re-pricing that you are seeing now.

And Politics?

On the political side of the argument – the new Biden Administration is moving along without help from the Trump Administration – as Trump and some in the GOP are pushing for what seems like a new election! (Can you imagine that – a new election!!!) Now while that will not happen – they are fighting for re-counts in some of the states that they lost and suspect didn’t count correctly… and while he is entitled to do so and while the country is entitled to know the truth – no one really thinks (other than Donny) that anyone is rearranging the deck chairs. This morning the US Postal Service reports that they continue to receive ‘thousands of ballots’ even one week after election day. Now as each day passes – Biden’s lead continues to grow… (you can see where this is going, right?). North Carolina’s Republican Tommy Tillis has been crowned the winner in that states Senate race leaving Georgia hanging in the balance. As you also recall, that race has left both current GOP Senators and both Democratic challengers without a majority – throwing that race into a run-off on January 5th. So, while we know that the House and the White House are both Democratic – we are still unsure of the Senate and that will be the KEY to what’s next for the country and for policy, regulation and taxes. And while this will not price stocks in the long term – it absolutely has the ability to cause some short-term volatility in the weeks ahead.

This morning US futures are up across the board – Dow futures are +200 (teasing a record high), the S&P’s are up 30 pts, the Nasdaq is up 150 pts and the Russell is up 11 pts. The rotation out of those big Growth names and WFH (Work From Home) names and into cyclicals, small/mid-caps and international stocks continues… Russia announces that their results from their latest ‘Sputnik’ vaccine trials suggest a 92% efficacy rate – challenging the PFE efficacy rate… and that ‘might’ be helping markets rally (but I doubt it….) I mean – its Russia – if you’re not sure about taking an American produced vaccine are you really going to consider a Russian one? Come on!

The VIX (fear index) has plummeted since the election and the PFE news… falling 45% as calm comes over the country and the markets. This is a positive as it suggests less volatility in the months ahead… but remember – this could spike on a range of issues, but the one that is most likely to cause unease is the ongoing drama of the election… Now – what I see, is that the VIX and the markets have already decided the outcome… and thus are not concerned nor are the focusing on the drama. Investors and markets are now looking out 3 – 4 months, expecting a vaccine and a solution, allowing the country and the world to return to ‘normal’ – whatever that looks like. But it will be different than what we are living now.  In any event – stick to the plan.

European markets are also higher as investors there focus on the vaccine and what that means to their economies. There are a handful of earnings that did get announced in Europe today and they are driving some of the individual action, but not the broader action… that is squarely focused on the vaccine. US election drama while entertaining is not playing a role – because leaders across the region have already made calls to President Elect Biden congratulating him on the Win. Remember that China and Russia (and North Korea) have not called Donny and made it clear that they won’t until the election is called. At 6:30 am. The FTSE +0.6%, CAC 40 + 0.42%, DAX +0.35%, EUROSTOXX +0.34%, SPAIN +0.4% and ITALY +0.48%.

Oil continues to rally and this morning it has broken up and through all 3 resistance lines… up $1.3 at $42.65. Crude stockpiles fell by 5.1 million barrels last week, vs. what the analysts expected of a decline of 900k barrels! (big miss!). Which means someone is using oil to power something – capisce? Chart resistance is now at $44 after that its $50! Just think what happens when those locked down countries in Europe begin to re-open. The near-term concern here is what will happen in the next 2 weeks… We are seeing a spike in cases and some hospitals are reporting an overflow of patients… and this will cause some concern in the states. Will we see regional lock downs or not? Stay tuned.

The S&P closed at 3545 yesterday after testing as high as 3557 – well below the Monday high of 3645! Futures are pointing higher, but my guess is that we are in this 3400/3600 range for now… The spike up and thru 3600 was exciting but I think the political conversations over the next weeks will keep it in check for now. More talk of what Biden will be able to get done and what he will not be able to get done is now part of the daily conversation… Remember, we will have to wait until January 5thbefore we understand which way the Senate falls… the country has a new President Elect, the world has a possible answer to covid19, European countries in lockdown mode and a new wave of the virus is set to hit the states. In any event – do not be surprised to see a bit of a churn after the surge on Monday. It would be normal to see some consolidation and digestion in the weeks ahead. Yesterday I said that I would not be surprised to see the S&P come back to fill the gap it created on Monday… it did that yesterday. Today is a holiday for much of the country – so any real move will have to wait until Thursday. In any event – stick to the plan and call you advisor if you have questions.

Take good care

Kp


Italian Style Sweet Sausage Stuffing

For this you need – Garlic -sliced, Onions- diced, cubanelle peppers – chopped, s&p, Sweet Sausage meat (out of the casing), celery – diced, Italian bread- cut into cubes, chicken broth, mashed potatoes, Olive oil, and white wine

Cut up the Italian bread into cubes – maybe like 1 cup and set aside.

In a lg sauté pan – heat up the olive oil and sauté the garlic, onions, cubanelle peppers & celery until soft – maybe 10 mins… now add in the sausage meat and brown nicely (using the back of a fork to break it up as it cooks). Season with s&p Next add in a cup of chicken broth and a splash of white wine (this is optional) – If you don’t add it to the mix then pour yourself a glass – and let it all simmer together. Remove from heat and let it cool.

Next up – mix 2 cups of mashed potatoes along with the bread into the sausage mixture and mix well. Now transfer the mixture to a lg buttered baking dish and bake in the oven – uncovered for 20 mins on 325.

Buon Appetito.

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Kenny Polcari

Kenny is the editor of Morning Thoughts and has been with Seven Figure Publishing since 2019.

Kenny is a CNBC exclusive contributor appearing on shows like The Halftime Report, Power Lunch, and Closing Bell. His market commentary has reached audiences across the nation on media outlets such as Bloomberg, Fox, ABC, and more.

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