Summary

  • The week ended July 24, 2020 saw the S&P decline 1.06% and the index now stands about break-even for the year. Tech led the downturn last week including Intel, Citrix and Tesla all declining more than 10%. The market executed a “dash to trash”, scooping up the largest YTD underperformers-energy and financial stocks, which outperformed as did the Materials sector on the heels of numerous commodity breakouts.
  • Factor-wise, Overbought Technicals worked for the first time all year last week, and EPS Revisions, Momentum and Growth led the rest of the gainers. YTD leading quant factors for security performance continue to be Growth, Sentiment and Volatility.
  • Companies reliant on Share Buybacks continue to lag. In the low-growth Covid economy, investors are willing to pay up for organic growth such as tech as well as consumer “staple” recurring revenue companies such as Clorox and Campbell Soup. Less reward is placed on financial engineering such as share repurchases.
  • Our Work From Home Index of 70 stocks levered to current trends withing the “closing” of the economy rose 0.6% last week, though we note a worrisome loss of momentum in this prominent leadership group. We initiated starter short positions in Work-From-Home stocks Zoom and Shopify vs. long positions in Reopening stocks such as Intuitive Surgical in mean-reversion pair trades.
  • Inflation indicators are waving multiple flags, including the falling dollar, commodity price rises and inflation-protected securities such as U.S. Government TIPs have price momentum.

Covid-19 has transformed how and where employees work and accelerated consumer and corporate reliance on technology. We’ve tracked the stocks levered to the Work From Home theme all year, and calibrated an index of 87 companies and four ETFs directly benefitting from this trend (FP WFH). These companies represent a diversified group of growth stocks in the technology, media, health care, consumer and real estate sectors, and each has idiosyncratic drivers of organic growth.

The median FP WFH company share price is up 29% YTD and only one (Target) is down YTD.. The group lost momentum last week and we’re evaluating opportunities on the pullback.

On the other side of the ledger are the companies levered to travel, entertainment and office space – we calibrated an index of 77 such companies in the COVID cross-hairs (FP REOPEN). These include airlines, restaurants, hospitals, cruise ships, travel agencies, retailers, live entertainment venues and other Covid-affecting industries. The Reopening Index has had trouble maintaining gains after vaccine-related news.

17 members of the Reopening Index are ranked “1” on our Trend1 model. The average 1-rank is up 15% YTD.

The Buyback Kings – those 50 companies in the S&P 500 with the largest share repurchases – rose 1.7% last week and are now down -36.6% YTD on average.

Source: FlowPoint

The FTSE Nordic Region ETF (GXF: $23) joined the U.S. (SPY), Taiwan (EWT) and Switzerland (EWL) as the only country ETFs  “1” ranks on Trend1.

Inflation Indicators Are Sending a Consistent Message:

Retail Investors Remain Skittish. Which is Bullish…

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