Optimistic About the Markets Direction - A Contrarian View

11 days ago
4 Min Read
834 Words


I am getting more optimistic about more future growth for the market.

I will admit, while much of the new coverage is very negative about the recent market data, the Tech Sector pull back, and all new spikes in Covid Variants I think things might actually be really positive for the broader market.

When Covid hit, so many companies in the Tech Sector started to get crazy valuations. Microsoft, Zoom, Pelton, basically any service or product that helped people work from home was driven way up in valuation. It appears the market is now taking a step back and getting the valuations back in line. Sure we have a tech sector pull back, but many other areas of the market are positive and following the moving averages.

Why I See Growth In The Future

Demand, Demand, Demand, so much pent up demand. While many were impacted financially by job losses, there are also a large number of people who were not. People seem to be sick and tired of anything to do with a lock down and are ready to travel.

Did you see what happened in Florida with Spring Break - it looked to me like everyone did what we could to flatten the curve, and keep distance but after over a year has gone by the message has worn off. People are desperate to get back out and do.

You look at hotel prices for the memorial day weekend, you will see the same just about anywhere you look. Prices are 2-4x the booking rates for March. You can look forward to paying $190 to stay in a random small down Hampton Inn - that would normally sell for $95. I think this demand is not just in travel.

Home improvement costs are up - again - after they were up last year. Some places like Tennessee are having such a surge in pricing that new construction has to stop because they can't cover the increase in raw materials.

Boats, RV's, and Powersports all saw tremendous demand in the last year, not to mention the poor folks in the repair shops trying to fix all the old and broken. Supply is still delayed and backlogged in many areas.

Lower Costs

A lot of companies took a hard look last year and made cuts that should have been made a long time ago. Most corporations are also assessing their current real estate needs, and many are anticipated to either not renew their current lease, or pay to break the lease as many employees are not coming back into the office.

Having employees work remote has worked out well for most of those who have been doing it for over a year. It has also lead to some complications. Wages are starting to be tagged to positions that are labeled 100% remote. That means, the job band will pay x - where you choose to live is on you. No more paying more for an employee who lives in San Francisco vs Iowa. If you are working remote, then you are competing against everyone else working remote.

These companies have also invested in other automation to help reduce their overall costs,and they are entering 2021 with better margins, and facing the increase in demand. This should result in higher earnings and continue to push the market higher.

The jobs market data is also pointing to more demand and growth across sectors. Non Farm payrolls increased 916,000 jobs. That is a big number. The companies that are left, and are well

Concerns - Government Spending, Taxation, Trade Wars, Etc

Of course nothing is a guarantee. If the world governments keep "printing" money like the US, eventually that will catch up. While many thought that would happen by now - they keep managing to kick the can.

A big tax increase could also curtail any gains, no matter what story is told, the only group of people who pay taxes is the consumer. Corporations always pass that tax costs onto them to continue to meet their margin goals. A tax increase will hurt everyone's bottom line.

Not to mention the typical trade war banter between the US and China is always a threat to derail the markets with fear. while these are all concerns, I don't have the the foggiest idea how to give them a real probability of disrupting the market.

Let me know what you think below - do you think I am clueless, or do you agree there is support for continued growth?

In the end, I think any pull back in the broader indexes, SP, Small/Mid Caps might be a good opportunity to be contrarian and move against the herd.

@cluelessinvestor - aka a random nobody on the internet spewing nonsense

This post NOT financial advise, it contains my personal opinion and experience and is intended for educational purposes. Perform your own research and analysis prior to making investment decisions.

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