By John Persinos
Here's my video update for today. My article below provides greater details. I also highlight an investment opportunity that provides outsized potential (with a hedge) under current conditions.
Despite the many challenges we face, why am I so bullish about 2021? One reason is pent-up demand.
During the coronaravirus pandemic, U.S. household saving rates have been soaring. When consumers finally emerge from virus-induced strictures, they'll be eager to pump that liquidity into social activities. They'll want to eat in restaurants; attend big-screen movies; catch a ball game; go on vacation. Yes, we're seeing a permanently higher adoption of digital at-home technologies. But we're social animals. Human beings can't live by Zoom alone.
What followed the 1918 influenza pandemic? The economic boom and bull market of the Roaring Twenties. You should position your portfolio for the secular bull market to come in 2021. As I've previously written, one overarching theme will be public works spending.
Read This Story: Get Ready for the Great Building Boom of 2021
The topic of social activity brings me to "Black Friday," the annual American shopping rite that falls on the day after Thanksgiving. But before I get to this year's holiday retail picture, let's re-cap last week's market action.
The Dow surpasses 30K...
The past week saw encouraging news about coronavirus vaccines, which helped drive the Dow Jones Industrial Average up more than 12% for the month. The Dow surpassed the 30,000 barrier for the first time before pulling back. The S&P 500, NASDAQ, and Russell 2000 all posted record highs as well.
Trading was shortened last week, with the markets closed on Thanksgiving and early on Friday. The dominant news was the transition to a new U.S. president, which has lifted investor moods (see table).
Does the post-election relief rally have enough momentum to last into the new year? I think so, yes. However, we'll experience volatility along the way.
The resurgent coronavirus is undermining the jobs recovery. New fiscal stimulus isn't likely to arrive until next year, even though enhanced unemployment benefits are due to expire in December. And yet, the consumer is showing resilience.
Shopping by keystroke…
About three-fourths of U.S. gross domestic product is made up of consumer spending, and in turn about three-fourths of consumer spending occurs during the holidays. The traditional kick-off to the shopping frenzy is Black Friday.
Bricks-and-mortar retailers reported diminished crowds for Black Friday last week, amid a "third wave" of the coronavirus that has brought greater social distancing restrictions. E-commerce sales, however, shot higher as millions of shoppers eschewed physical stores to hunt for bargains online.
According to Deloitte's annual Holiday Retail Survey, the pandemic is accelerating the tendency of shoppers to skip the mall. Consumers expect to spend only 28% of their holiday budget on bricks-and-mortar stores this year, down from 36% last year and 46% in 2015. Online spending now accounts for 64% of the total (see chart).
Adobe Analytics estimates that e-commerce sales in the U.S. for Black Friday hit a new record of $9 billion, a year-over-year increase of 21.6%. Adobe expects similar gains for Cyber Monday. The explosion in e-commerce sales has sent Amazon (NSDQ: AMZN) on a hiring spree.
TechCrunch notes a huge shift in digital shopping methods: among the $9 billion in online sales during this year's Black Friday, a whopping $3.6 billion occurred via smartphone.
The increase in e-commerce sales is remarkable in light of the worsening employment picture. As COVID-19 rages in all regions of the country, business lockdowns are on the rise and so is unemployment.
According to the U.S. Department of Labor's jobs report released November 25, the number of Americans newly applying for unemployment benefits through state programs increased for the second consecutive week.
Jobless claims are down from their unprecedented levels in late March and early April, but the number of weekly initial claims remains alarmingly high. In the week ended November 21, 778,000 Americans newly applied for benefits (see chart).
Insured unemployment through regular state programs hovers at 6.04 million for the week ended November 7 and the total number of people obtaining unemployment assistance remains above 20 million.
The pandemic will only make the jobs situation worse. According to data updated on November 29 by the Centers for Disease Control and Prevention, the U.S. COVID-19 death toll could reach 321,000 by mid-December.
The imminent arrival of vaccines, new public health policies, and fiscal stimulus are reasons for hope. I expect economic growth to pick up in early 2021. But until then, it'll be a bumpy ride. Your portfolio will need a hedge.
A classic hedge for uncertain times…
The conditions that I've just described make gold a smart investment play now. Historically, gold has served as a safe haven, improving risk-adjusted returns and adding liquidity during times of crisis.
Read This Story: Investors Ignore Gold at Their Peril
The best way to gain exposure to gold is by purchasing shares of mining companies, which use operating leverage to exponentially benefit from rising gold prices.
Our investment experts have pinpointed a gold mining play that's ready to hand investors outsized returns, with a hedge against broader market dips. Early investors in this small-cap miner stand to make a fortune. Click here for details.
John Persinos is the editorial director of Investing Daily. Questions about precious metals investing? Drop him a line: mailbag@investingdaily.com. To subscribe to his video channel, follow this link.
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