since the election…

I was watching CNBC yesterday afternoon.

Regular readers know I think the presenters there are by and large actors pretending to be market analysts. On the other hand, there’s the weird thing for investment managers that potential (and actual) clients regard an appearance in what is in effect a soap opera as a powerful endorsement of their professional competence. So CNBC often has surprisingly good guests.

That wasn’t the case while I was watching yesterday. But there were graphics that illustrated the (surprising to me) strong performance of big car companies since the election and the fact that retail stocks are up about 12% so far in January.

I did some poking around and this is what I found. Since the day after the November election through the close on January 12:

Tesla +92.7%

Russell 2000 +31.8%

GM +27.7%

Target +24.7%

Ford +21.7%

S&P 500 +12.8%

NASDAQ +10.3%

Walmart +3.8%

Dollar General +1.0%.

Over the past 52 weeks, Ford is up less than a percent and only Tesla (+748%) and Target (+57%) have outpaced the +42% gain of NASDAQ.

How do I read what’s going on?

–there’s been a dramatic shift in the market since the election away from multinationals and toward domestic names, as the upturn of the Russell 2000 vs. the S&P for the first time in three years shows

–left-by-the-wayside names like GM and Ford are suddenly showing some life. This is startling. Over the past five years, the S&P is up by 137% and the R2000 by 111%. In contrast, GM is up by 52%, or less than half either index, and F is down by 22%. So, yes, the R2000 is dragging these two up with it. But I also see this as an indicator of sky-high valuations elsewhere if domestic carmakers look like attractive investments

–Walmart & DG vs. Target. The least affluent Americans typically go to local stores that aren’t on the stock market map. The dollar stores are one level above that. WMT is another level higher, with something like a third of its customers low-income. TGT is somewhere between WMT and traditional department stores.

When time are bad, consumers spend less and shift to lower-price alternatives; when times are good, they gradually reverse this behavior.

Personally, I’ve begun to notice that consumer electronics items and photography gear is sometimes cheaper from WMT than either AMZN or B&H. So I’ve begun to use WMT more. My guess, though, is that I’m way, way in the minority on this.

The way I interpret the price action of these three big retailers is that the market is figuring that pandemic help is on the way under Biden and anticipating a cyclical shift to more upscale that is yet to occur.

my bottom line

I think the retail stores are signaling that the market thinks better economic times are in store under Biden.

The domestic autos, on the other hand, are sending the worrisome valuation signal that for some professionals they’re all that’s left that’s buyable.

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