As I type this on Friday morning, before the U.S. “markets” resume to then close out the week. I would like to offer only a few words of caution to those that are seeing everything skyrocket to heights that would make an astronaut blush. And it is this…
Now that it’s been officially declared that Mr. Biden will assume the office of president on the 20th and Mr. Trump has for all intents and purposes delivered his version of a concession speech reinforcing that point, said “markets” are going to have to begin dealing (aka: re-balancing) with the now all but assurance that not only taxes are going to go up, and fast. But also, regulation and a whole lot more is going to go up, again, and fast. Not because I believe they will, but rather, that’s precisely what the incoming administration stated it would do.
If they follow through on one third of what they campaigned on (i.e., “Green New Deal” type legislation and so forth) the current “market” environment and/or its positioning is not. And “is not” should be interpreted as “bigly.”
We are currently awaiting the U.S. employment figures as I type, as well as, we are about to enter an earnings season that has all the pretense for revealing some stark holiday comparisons. Some (say in the online departments) may be stunningly good. Others (say anything brick and mortar based) may turn out to show utter disaster. For we’ve never had a “Holiday Shopping Season” during a pandemic induced lock-down situation like this – ever.
Wall Street is now going to look at every sector and have to calculate all with an entirely new lens and filter, for there is now no other scenario to adjust for other than a anti-business environment.
With the Democrat party now controlling all the levers of U.S. government, along with its self professed socialist ideals, regardless if one is for it or against – it is what it is. And there will now have to be adjustments made. Period.
When it comes to business, markets or finance, what many forget is the speed in which this “re-balancing” aspect I’m speaking to can take place. This is now a period of time for great change. And one has to be on one’s toes and attentive to every possibly where “market” weakness may be showing. The reason for this? Everyone is now convinced ever-the-more that these “markets” can no longer have bad days, never-mind bad weeks, months or years.
The idea that Elon Musk has become the “richest man in the world” surpassing Mr. Bezo’s on Thursday and adding to that fortune by 10’s of $Billions in just the over night hours (Tesla™ stock is up nearly another 5% to over $850 in the pre-market as I type) with a car company that produces less that 1% of market share, and – doesn’t make a profit other than selling regulatory government credits, is simply ludicrous on its face.
Tesla is closing in on becoming a 1TRILLION $Dollar market cap entity. And it can’t make money. It is now larger (in market capitalization) that all car makers combined that sell over 70 million vehicles a year at a profit, repeat, at a profit! At some point reality will set in, for it always does. It’s the “when” that’s the near impossible aspect to calculate.
To reiterate and clarify: It makes no difference whether you love or hate the new administration, love or saddened that the last one is gone. That part is now immaterial.
The only thing that matters now is: What are the coming ramifications and expectations that are going to need to be addressed from both a business prospective, as well as “markets?” For all prior assumptions or calculations are now null and void.
Stimulus checks have a “sugar rush” effect on “markets.” However, the only thing that will keep them aloft is, at some point, “meat and potato” expectation and deliverables.
But make no mistake…
The proverbial dust is now settling. And what awaits this new horizon will come into focus very soon.
© 2021 Mark St.Cyr