Hey, Why Risk It?

They call it “risk off.”

There’s a term that market watchers use to describe an equity milieu where the prudent trade is taking risk off of the table and selling stocks (usually those stocks that have had big runs higher). That term is “risk off,” and that’s certainly a description that fits what we’ve seen this week.

Indeed, this week’s approximately 6% decline in the major averages represents the worst week for markets since the March COVID-19 panic. So, I think it’s safe to sing out that the risk-off saints have come marching in (for you music lovers out there, I prefer the Louis Armstrong version of the classic song referred to here in the key of G).

Of course, this selling should come as no surprise to any sentient market watcher as of late. After all, markets have been disappointed by a confluence of negative events, beginning with the pathetic failure of the White House and Congress to reach a coronavirus stimulus deal. A deal of some $1.5 trillion has been priced into markets since late September, and while markets still expect a stimulus package in that range, it’s not going to happen for many more weeks, at the earliest.

The next risk-off market catalyst this week was the surge in the number of COVID-19 cases in Europe and here at home. The surge in Europe prompted the return of economic lockdowns of varying degrees in many parts of the continent. This has been a very negative development for actual economic activity, as well a big negative on investor sentiment.

Here at home, we are dealing with another resurgence of the virus, as case counts in some states now are at alarming, even record, rates. Fear that many states will begin to reimpose restrictions on businesses similar to the way they are doing in Europe has been a big part of this week’s risk-off posture. Indeed, this week, the city of El Paso, Texas, imposed a two-week lockdown for non-essential businesses as the number of COVID-19 cases is spiraling out of control there.

Yet another risk-off factor fueling markets today is the sell-the-news reaction to otherwise very good Big Tech earnings results from Apple, Amazon, Facebook and Google. While the results for the most-recent quarter were almost all positive, the outlook for the fourth quarter was rightly uncertain, as stated by the companies themselves. Well, Wall Street doesn’t like uncertainty. As a result, we saw selling in these market leaders (with the exception of Google).

Then, of course, the calendar is a huge factor. By calendar, I mean that big date on Tuesday, Nov. 3, a.k.a. Election Day. As it stands right now, the polls and the odds clearly favor a Biden win, but we all know that any poll that involves President Trump needs to be taken with a grain of 2016 salt.

Interestingly, I was asked by several people this week what I thought “my gut feeling” was with respect to the election outcome. My honest answer is that my gut is just as confused as my brain when it comes to gaming the results. Admittedly, I do have a gut feeling that the president will win reelection, even though my brain and the numbers that are available to us right now tell me that Joe Biden will be victorious.

Regardless of the election outcome, I want you to keep the following thought at the forefront of your mind: You see, regardless of who resides at 1600 Pennsylvania Ave., or who calls the shots on Capitol Hill, we will continue to make thoughtful, well-reasoned and precise decisions with our money in a way that’s designed to maximize our gains and minimize any losses.

That’s what we’ve done in this service since its inception, and that’s what we will do whether Republicans are in office, Democrats are in office, Socialists are in office or, God willing, Libertarians are in office.

Now, recall that last week, we added Latin American e-commerce giant MercadoLibre Inc. (MELI) to the Tactical Trends Portfolio (TTP). Our official buy price on MELI is $1,299.26. As of Thursday’s close, we were up just slightly in the position, although in early Friday trading, the stock has come under pressure (along with nearly all tech-related stocks.)

We will get earnings results from MELI on Thursday, Nov. 4. While I expect a big quarter on both the top and bottom lines, the direction of this and other stocks will likely be clouded in the volatility of what could very well be an unknown election result. So, stay tuned for an update on this, and the state of the world, next Friday.

Finally, whatever happens on Tuesday, remember that you are the writer, the director and the star of your own personal play — and that’s true no matter who is in office. So, treat yourself like someone you are responsible for helping. Make yourself the focus of your life, and eschew an undue focus on politicians. I guarantee you, they are more concerned with themselves than with you.