By Steve Goldstein, MarketWatch
Don’t count Peter Tchir, head of market strategy at Academy Securities, in the markets-are-irrational camp.
“If you look at the stocks that have rallied the most, it’s Amazon /zigman2/quotes/210331248/composite AMZN +1.94% , it’s Apple /zigman2/quotes/202934861/composite AAPL +1.98% , it’s Zoom /zigman2/quotes/211319643/composite ZM +6.11% , it’s Microsoft /zigman2/quotes/207732364/composite MSFT +2.11% — companies that have actually benefited from a work-at-home-type environment,” he said. He said this is illustrated by comparing the gap between the market-cap-weighted S&P 500 index /zigman2/quotes/210599714/realtime SPX +1.49% with the equal-weighted version /zigman2/quotes/210600229/delayed XX:SP500EW +1.49% . “So you’ve had this real leadership from the top companies,” he said.
The recovery in the market came after reports showed the new coronavirus disproportionately hitting the elderly — which gave Tchir confidence in the reopening of the economy — as well as unprecedented federal aid, with talking already under way on a second Coronavirus Aid, Relief, and Economic Security Act
Tchir says he expects the government to act more aggressively on infrastructure spending and supply chain rebuilding.
“I think President Trump has always made it clear in his life that you have to find someone to blame. So we are going to blame China. So how do we pick a fight with China? I think we will get supply chain rebuilding,” he said. The U.S. has already come down hard on Chinese telecom equipment maker Huawei Technologies, he noted.
Only China and Russia have been named as “strategic competitors” by the U.S. government, he added. “You’ve labeled one country that you’re most likely to have some degree of friction with, and you’re getting your most important stuff from them,” he said.
It is, ironically, the market gains that make Tchir nervous. “The government acts much better when markets are in disarray,” he said. The protests over the killing of George Floyd and ensuing violence also may shift attention away from the economy, he said.
As for specific sectors, he said he has a contrarian strategy. “So I’m always looking where the people are hiding. And I think the bears are still short autos, they’re still short commercial real estate, and they’re still underweight financials,” he said. To play his view that more cyclical names will outperform the technology stocks, he would either go long the equal-weighted S&P 500 /zigman2/quotes/202854823/composite RSP +1.57% and short the market-cap-weighted S&P 500 /zigman2/quotes/209901640/composite SPY +1.54% , or go long the Russell 2000 ETF /zigman2/quotes/209961116/composite IWM +2.44% and short the Nasdaq-100 /zigman2/quotes/208575548/composite QQQ +2.21% .
In an absolute stunner, the Labor Department reported 2.5 million jobs were added in May, and a decline in the unemployment rate of 1.4 percentage points to 13.3%. Eased lockdowns brought back workers in leisure and hospitality, construction, education and health services, and retail trade, the Labor Department said.
“This much better than expected report reinforces our view that April likely marked the trough in U.S. economic activity,” said Brian Coulton, chief economist at Fitch Ratings.
Trump administration officials expect to spend up to $1 trillion in the next round of economic stimulus, Bloomberg News reported .
Messaging service Slack /zigman2/quotes/212180539/composite WORK +1.30% reported 50% revenue growth and a new partnership with Amazon Web Services.
Gap Inc. /zigman2/quotes/206554267/composite GPS +6.60% reported a $932 million loss in its fiscal first quarter ending May 2, as the retailer suffered from closures due to the coronavirus.