The doves are crying. Prince passed away this week unexpectedly, much to the sadness of his many fans. Beyond his funk-based rock and searing guitar that demanded you get off your seat and start moving, he was the perfect rock ‘n roll performer: Kids loved him because parents hated him. His sensual outfits and confident smirk left the older set angry and confused.
Well, sort of like today’s markets.
Confused? Both investors and Janet Yellen, another weeping dove. Weekly unemployment claims came in at a scant 247,000, the lowest number since 1973. Does this mean we have a screaming hot economy? Nope. All is not right in manufacturing. Friday’s PMI number was a disappointing 50.8. Regionally, the Philly manufacturing survey contracted to -1. Housing starts disappointed. Quarterly profits are down again.
Angry? Probably. It is another hated stock rally that has left many behind and the same old names are not necessarily working. With earnings misses at Microsoft, Google and Netflix, small cap names seem to be where the action is. The Russell 2000 index gained about 130 bps last week versus 52 bps for the S&P. Money flowed out of technology, and into energy, health care and materials. The NASDAQ was down (65 bps).
That is a trend that is likely to continue as beaten-up sectors join the market fun - and it is good for Hybrid Vigor readers. Keep an eye on the HOCS scores for ideas. HOCS is weighted heavily to the small cap universe with a heavy dose of health care. Looking ahead to the coming week, the Fed meeting should be another punt given the less than buoyant economic data. Even a “one and done” in June may be at risk given the Fed’s reluctance to move until we get more oomph in the global economy. Central bankers appear on hold until China finally muddles through. Well, that is the bullish case. Last week at the Asian Society in New York, George Soros predicted a hard landing. It seems to corroborate what we are hearing from our own sources in the Middle Kingdom. They tell us lots of bad debt finally getting cleaned out and a 20% devaluation of the Yuan before the year is through.
Bill is on a much needed break this week - his first since launching Hybrid Vigor almost two years ago. This week, George Lynch peels back the onion that is j2 Global to get to the real story and Will Frohnhoefer takes a look at how to profit from the recent Peabody Coal bankruptcy.
(This is the cover letter for the subscription-based weekly Hillside's Hybrid Vigor newsletter. For a complete copy, please contact John Anderson at + 1 (646) 712-9289 x 107).