Newsletter 11/16/2020

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Hello!

I hope this email finds you happy and healthy.

Here in Orange County, we are most likely facing another small lockdown as California's cases top 1 million. Both Callaghan and I are working from home, so this won't interrupt our operations. In fact, this past week has actually made our lives easier! In an odd way, we know exactly what is going to happen over the next few months: we are going to live in moderated quarantine until there is a COVID-19 vaccine. I know this sounds dismal, but we cannot discount the value of clarity. For many, this is the first time they have been able to plan ahead in 2020.

Let’s talk about what this means from both a personal and an investor standpoint.

We are still not 100% certain who our next president will be, but we feel confident the election will go to Joe Biden. The electors vote on December 14, so we aren't holding our breath until then. Unless something drastic changes, we are planning for a Biden administration. Accordingly, much of the information I’m sharing comes from

Biden’s Plan to Beat COVID-19

.  

Over the next 3-4 months, we will probably experience a very similar environment to the one we saw in March and April. Cases will skyrocket, hospitals will reach capacity, and states will change their restrictions accordingly. The main difference is that we will most likely NOT return to a full lockdown. Biden’s transition team is calling it a “dimmer switch” approach where the states change restrictions dynamically as hot spots rise and recede. We also have the systems in place from the first spike: we have the supply chain to provide PPE to all front-line workers and Operation Warp Speed will still be in full effect despite the change in management. We expect to see renewed stimulus efforts, particularly to small businesses and front-line workers. We may get another stimulus check and a boost to unemployment benefits, but we’re not ready to hang our hats on that nail until the congressional elections are certified.

On the investing side, we expect a bumpy ride with big gains on any stimulus news. The sectors that were unfavored in the last three months will play catchup, which is called a “market rotation”. In summary, we expect indexes like the S&P 500 to rise consistently while indexes like the NASDAQ 100 (which is heavily invested in technology stocks) will rise only while we remain quarantined. On a day to day basis, we expect to follow the same pattern we have seen: when quarantine dominates the news, stocks like Zoom and Slack will do great; when reopening is mentioned, department stores and airlines will rise.

I cannot stress this enough: the markets absolutely love clarity. When investors can plan ahead they are willing to be riskier, and I have never seen a more risk-tolerant investor base than we are seeing today. We are very confident that the S&P 500 will rise in the first quarter of 2021. For this reason, there is urgency in our advertising for the first time. We are looking to get new clients invested immediately so they can take full advantage. If you are interested, you can reply to this email or get in touch on our

website

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These next few months aren't going to be pretty, but we’ve been through this before. We can work with the knowledge we gained the first time around. For many, this is an opportunity to “do quarantine right”. For anyone wishing they had started a new hobby or a new workout routine, you have another chance! For those who are afraid of a new lockdown, you can rest easier; ee most likely won’t see one as we saw in April.

As a final word, this is the only time in history when we can help save the world by staying on our couches, so we plan on doing plenty of that in the coming months!

Wishing you a happy and healthy holiday season.

Warm regards,

Nate Hoskin, CIO

Hoskin Capital