Retail spending grows … jobless-claims drop … what a Kamela Harris VP might mean for marijuana investors … and where the S&P goes from here
There’s been lots happening in the headlines this week. So, in today’s Digest, let’s bounce around and cover several stories affecting your wealth.
***Retail sales rose in July despite the increase in coronavirus cases
This morning, we learned that U.S. consumers boosted retail spending 1.2% in July. It was the third straight month of sales increases.
The news was mixed, however, as economists surveyed by Dow Jones had expected gains of 2.3%. The shortfall is partially attributed to a slowdown in auto sales.
On Wednesday, our technical experts, John Jagerson and Wade Hansen wrote that this morning’s retail sales report would be a key indicator revealing the health of our recovery.
From their Strategic Trader update:
As you can see in the following chart, expectations for retail sales are for an increase of 1.3% over June’s data.
However, if consumption exceeds that level, we believe that will provide further support for (stock) prices. We plan to open more exposure to the consumer sector if that happens.
Fig. 2 — Retail Sales — Chart Source: TradingEconomics
We don’t usually like to focus so much on a single metric, but in this case, consumer behavior will definitely make or break the rally.
To John’s and Wade’s point, here in the U.S., consumer spending makes up 70% of our GDP. So, as consumer spending goes, so goes the economy.
Given this, today’s report isn’t a total green light for stocks, but the markets are digesting the news as a general positive. As I write, the S&P is slowly grinding higher, yet again flirting with the all-time high of 3,386.15.
But if we fail to break the record and this rally loses steam, where is the next support level from a technical perspective?
Back to John and Wade:
… if the S&P 500 runs into resistance in the 3,400 range, we expect market breadth to be strong enough to establish support near 3,200.
This is very similar to the situation the index was in after setting new highs in June. At that time, the S&P 500 pulled back to support at 3,000 before heading higher again.
Given this, it’s likely we’ll be in record territory soon — even if it hasn’t happened by the time you read this Friday after market-close.
***In other signs of recovery, yesterday, we hit a jobless-claims milestone
For the first time since mid-March, U.S. weekly jobless claims fell below 1 million (specifically, to 963,000).
It’s a positive sign that the labor market continues to recover from the coronavirus.
The 963K number also came in below the estimate of 1.1 million from economists surveyed by Dow Jones.
Below you can see how the claims data has trailed off since its April high.
Continuing unemployment claims (tracking those collecting benefits for two or more weeks) also dropped. The figure came in at nearly 15.5 million, which is a decrease of 604,000 from a week ago.
However, the rate of the decline has been slowing in recent weeks, as you can see below.
For overall context, the U.S. has recovered about half the jobs it lost during the Covid-19 closures, according to a recent nonfarm payrolls report.
That puts the unemployment rate at 10.2%. It’s still far above the pre-pandemic level of 3.5%. Of course, that was the lowest in 50 years.
But comparing the current level to the lowest level in 50 years is unfair. Given the pandemic, today’s yardstick should be slow-yet-steady improvements — and that’s largely what we’re seeing.
Our expectation for this recovery should be that of a marathon, not a sprint. Given this, we shouldn’t confuse a slow recovery with no recovery.
Despite many doom-and-gloom headlines, the economy is clawing its way back. That bodes well for the markets despite bouts of shorter-term volatility.
***Marijuana investors are hopeful about Kamala Harris’ selection as Biden’s running mate
Earlier this week, we learned that Joe Biden has selected Sen. Kamala Harris (D-CA) as his vice-presidential running mate.
Marijuana investors have taken note, since Harris has been outspoken about her support of cannabis reform legislation.
Harris is the chief Senate sponsor of the Marijuana Opportunity, Reinvestment and Expungement (MORE) Act.
For readers less familiar, this is a piece of legalization legislation that would remove marijuana from the federal Controlled Substances Act. This means individual states would be free to enact their own cannabis laws without any fear of federal interference or repercussions.
The MORE Act also includes various restorative justice provisions.
From Harris:
Times have changed — marijuana should not be a crime.
We need to start regulating marijuana, and expunge marijuana convictions from the records of millions of Americans so they can get on with their lives.
Beyond the MORE Act and Marijuana Justice Act, Harris has also co-sponsored the SAFE Banking Act.
If passed, it would protect the banks and financial lenders working with marijuana businesses from federal punishment.
During her presidential run, she advocated a criminal justice plan that specifically called for “legalizing marijuana.”
Now, Harris’ position is likely to soften what has been, up to now, Biden’s opposition to legalization.
From Vox:
Former Vice President Joe Biden, the presumptive Democratic nominee for president, still opposes federal marijuana legalization — putting him at odds not just with the majority of Democrats but also Americans overall.
In debates, in his criminal justice reform plan, and in his “Plan for Black America,” Biden has said he supports the federal decriminalization of marijuana, which would maintain fines but do away with prison or jail time for possession. But he remains opposed to full legalization, which would remove all penalties and, typically, allow sales for recreational purposes.
Despite this, Harris’ choice on the ticket reflects a movement toward a pro-cannabis stance.
From an investment perspective, remember that when legalization eventually comes, it will unlock a multi-billion investment market. Grand View Research recently put out a report estimating a market size of $73.6 billion by 2027. That would mean a compound annual growth rate of 18.1%.
Here’s our cannabis investment expert, Matt McCall:
In short, the sector looks poised to keep moving higher.
And as the election nears, it will be interesting to see how these stocks perform. I remain confident that cannabis legalization at the U.S. federal level is inevitable in the coming year regardless of who wins the presidency. And if there is a democratic sweep, it would likely be even better for U.S. cannabis stocks.
***Finally, a quick word of congratulations to Matt McCall’s Ultimate Crypto subscribers
On the year, the Dow Jones is barely negative …
Corporate bonds are up 8% …
Gold is up 29% …
Bitcoin is up 64% …
Meanwhile, Matt’s average altcoin recommendation in his Ultimate Crypto portfolio is up 164%.
Spearheading these gains is a huge 741% winner.
Matt’s subscribers acting on his recommendation sold a third of that position recently, locking in a 551% gain. The rest of the position continue to soar.
Some broader context about the portfolio …
In it are 11 coins. Five have doubled (gains greater than 100%). Three are showing returns greater than 200%. Zero are showing losses.
What’s hard to believe is Matt believes there are even more substantial gains ahead. That’s the power of these small, elite altcoins that have the ability to double, triple, or produce even bigger gains in just weeks — sometimes days.
Just yesterday, another Ultimate Crypto altcoin tacked on roughly 50% — again, in just one day.
To be clear, safety and position sizing are critically important when you’re wading into the crypto world. But when you’re investing responsibly, no other asset I know of has the potential to create wealth as rapidly as top-shelf altcoins. After all, these gains speak for themselves.
It’s not too late to get in on the gains, as Matt says there is still a lot more to come. To learn more about Ultimate Crypto, click here. Most importantly, a huge congratulations to Matt’s subscribers.
We’ll continue to keep you up to speed on all the stories in today’s Digest.
Have a good evening,
Jeff Remsburg