Inside the WSJ Interview
SP500 Hits a Fresh New High on 4/23/19
The reason the market has been able to climb out of a hole from December is two fold:
- In December the expectation was that the Fed would continue to raise rates in 2019 and beyond until they overshot some unknown equilibrium point. That has completely shifted and the Fed has stopped raising rates and stopped selling bonds (bond selling sometimes causes the economy to contract because it sucks money out of the economy) which is bullish for stocks.
- Because of the slowdown in Europe and China combined with the stance of the Fed, earnings expectations were being reduced such that going into Q1 the market expectation was for earnings to SHRINK by -2%. But the reality is, now that we are about 1/3 of the way through Q1 earnings, earnings have been tracking at about +6%. The comparison between -2 and +6 is a large leap forward and stocks have responded accordingly.
Medicare For All
The clarion of “Medicare for all” is having a significant negative effect on all health care stocks, even device companies. It’s a reality check when a person realizes that “Medicare for all” would hurt device companies like Intuitive Surgical. Investors are worried that medicare would put the brakes on surgical advancements due to a lack of funding leading to an unwillingness of medicare to pay for advanced surgical procedures. This many not matter to many people, but if you or a loved one can’t get the latest technology due to lack of funding of yet another social program driving the US further into debt…. You might reconsider the “benefits” of “medicare for all”. What at first sounds good, could actually be bad or even lead to the unnecessary death of you or your loved ones. This is not a political statement. This is an interpretation of “why” medical stocks are being sold by investors. Investors are actually worried about this situation becoming a reality in the next election cycle. Thus the future of medical technology advancement does not look quite as bright. Since Warren Financial doesn’t believe “medicare for all” will become a reality, we look at this pull-back in med-tech companies as a buying opportunity while we continue to monitor the political landscape for fresh indications about the future.
In the mean time, pure technology, not med-tech, continues to be a winning trade on wall street. We have previously highlighted trends such as telecom 5G advancements, Cloud tech, and Cannabis.