Stocks

Go Away in May

First, Warren Buffet disclosed that he dumped his entire stake in the four major airlines. He had owned 11% of Delta, the best of the bunch, and is abandoning it. $DAL is down about 10% in pre-market on the news. Warren is influential in more ways than one. According to Bond King, Jeff Gundlach, the “Genie is out of the bottle”, meaning the magic’s gone for institutional investors of these airline stocks. If one of the most conservative value investors dumps the stock, why would you risk retirement portfolios on it?

Second, the China-US squirmish is flaring up again. Just as the markets rallied over the trade deal, the markets will tank on news about possible retaliation for China’s “cover up” of Covid-19’s initial spread in Wuhan. This isn’t good for stocks in general but Chinese stocks in particular are sure to decline as there is always the once unimaginable threat of delisting the likes of Tencent, Alibaba, Huya and Iqiyi.

Finally, more an unknown than a headwind, but states seem dead set on opening up. Protestors don’t like being told to stay indoors as Spring has sprung. Small business owners need customers and surfers need to surf apparently. With a patchwork of execution, from Georgia’s “what the heck” to California’s stubborn refusal to allow sunbathers on beaches, no one really knows how this is going to go — and if the virus flares back up.

All three headwinds add up to uncertainly and we know the markets hate uncertainty. What can change the momentum again? We’re counting on news from Oxford University that their vaccine trial goes well. We hear word by the end of June. Until then, the dominant trend is negative.

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