Equity markets are under pressure and a number of factors are being suggested as drivers:
– Fall of Afghanistan
– Delta variant fears still
– Fed taper consensus shifting sooner
– Collapse in U Mich Consumer Confidence (CC) survey
But the plurality of headlines and media over the weekend and yesterday was negative and hence, a weak open is not a surprise.
However, my “Homemade” Predictive AI tools say I should be a buyer of this weakness. For a number of reasons, previously outlined, My tools see this as a transitory weakness and therefore, do not expect this weakness to last even beyond a short-term timeframe — perhaps even before the end of this week.
One of the major factors and headlines that has affected the market is the rise of the Delta variant, however, my AI tools have analyzed news from seven news outlets and have given me the following results:
Delta variant is already slowing in FL, 47 days into its surge = positive news
As the tool constantly looks for updates in cases, it saw the following and flagged it as positive:
– 4 of 6 counties are showing a sustained multiweek slowdown in COVID-19
– Miami + Palm Beach really stand out
Delta variant of COVID-19 took 45 days to apex in India and the UK.
– FL is showing that it is following a similar US trajectory
– FL also took the least mitigating steps
– yet, Delta is already slowing
BOTTOM LINE: According to my Predictive modeling and AI tool, I believe you need to lean into this weakness
The data shows a constellation of factors support a full “risk on” into Year-end. My rationale for recommending stocks is shown below. Post-pandemic drivers favor risk assets, particularly if I am going full risk-on.
– the key inflection in the past 10 days is the reversal higher in interest rates
– this becomes a big tailwind for Financials
– this also is a tailwind for Energy for two ETFs XLE & OIH
– However, you can not and should not forget about TECHNOLGY especially the FAANG group, because there is a pro-cyclical element to FAANG
– there is also a catch-up trade for AMZN & AAPL which are up a mere 2%/9% versus 18% for S&P 500.