Doc's Daily Commentary

Mind Of Mav

The Stock Market & The Economy Never Agree

The U.S. stock market celebrating new highs while unrest and unemployment surge is equivalent to Nero playing the fiddle while Rome burns, or so it seems to many.

The S&P 500 Index has surged 45% since it last bottomed on March 23 — up 8% since protests began in May — and is just 5% off its Feb. 19 record high.

Meanwhile, the U.S. economy is beset by a multitude of factors that will not be solved or mitigated for months or years. Against that backdrop, no wonder Wall St seems delusional.  

However, let’s remind ourselves that the stock market is not a barometer of the country’s health — politically, socially or especially economically.

Rather, its function, as detached from reality as it may sound, is to tabulate investors’ consensus view about the health and potential of publicly traded companies. In that regard, the market has ably done its job throughout this crisis, regardless of public opinion.

Sure, emotion plays into that, especially during heightened times of uncertainty, but suffice to say there’s never been a reliable relationship between the market and the economy.

The S&P 500, for instance, outpaced GDP growth by 13 percentage points a year after inflation during the 1950s and then lagged it by 5 percentage points during the 1970s. More recently, the S&P 500 trailed GDP growth by 5 percentage points a year during the 2000s, and then beat it by 10 percentage points during the last decade. It is rare to see a time when the two have moved in tandem.

What’s important is this: the market views any crisis as no more special than the last one.

Regardless of the larger political or social factors, the market cares little.

Go ahead and pick any tumultuous decade or pick any particular year — you’ll find no pattern of the market wilting in the face of turmoil, and often it will be the opposite.

Reminiscent of that, what can we say is behind the current stock market rally? A few things stand out:

1) Bond yields are too low.

2) Low-interest rates encourage leverage. It’s easy to find a margin rate of 1%.

3) The Fed just bought up trillions of dollars of bonds. So, whoever owned them before, had trillions of dollars in their accounts in cash. What are they going to do with that cash? The only investment option is equities.

There is also a bold and unequivocal consensus that a robust earnings recovery is on the way. Consider this: The top 20 best-performing stocks in the S&P 500 since March 23 posted a median return of 151%, more than triple the return of the FANG index. Ten of them, including four of the top five, are energy companies, a sector that was in dire shape just two months ago. The remaining stocks are financial services, cruise lines, casinos, and retailers — many of them businesses that were widely expected to have gone bust by now. 

Here’s what’s interesting: Shares of companies that are most vulnerable during downturns have been the best performers since the market bottomed in March.

The rest of the S&P 500 echo the same story. Among the top half of best-performing stocks in the index since March 23, 70% are from sectors that were hit hardest by the coronavirus and related shutdown — consumer discretionary, energy, financials, industrials and materials — and 30% are from sectors that better withstood or even benefited from it — consumer staples, health care, technology, real estate, communications, and utilities. The bottom half is exactly the opposite. 

Of course, that doesn’t mean the consensus is right to expect a surge in earnings.

Some prominent investors have already expressed their skepticism — David Tepper, Jeremy Grantham, Bill Miller, and Paul Tudor Jones to name a few.  Their consensus is that the market seems lost in one-sided optimism when prudence and patience seem much more appropriate. Conversely, a surge in earnings won’t necessarily translate into a broader surge for the economy, as the last decade and many before it have demonstrated.

Regardless, the most hated rally continues.

Right or wrong, it’s useful to bear in mind that the stock market’s job is to impart the consensus around companies, not opine on or account for the broader political, social, or even economic environment.

And a good thing, too.

It has rarely been good at it.

The ReadySetCrypto "Three Token Pillars" Community Portfolio (V3)


Add your vote to the V3 Portfolio (Phase 3) by clicking here.

View V3 Portfolio (Phase 2) by clicking here.

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What is the goal of this portfolio?

The “Three Token Pillars” portfolio is democratically proportioned between the Three Pillars of the Token Economy & Interchain:

CryptoCurreny – Security Tokens (STO) – Decentralized Finance (DeFi)

With this portfolio, we will identify and take advantage of the opportunities within the Three
Pillars of ReadySetCrypto. We aim to Capitalise on the collective knowledge and experience of the RSC
community & build model portfolios containing the premier companies and projects
in the industry and manage risk allocation suitable for as many people as

The Second Phase of the RSC Community Portfolio V3 was to give us a general idea of the weightings people desire in each of the three pillars and also member’s risk tolerance. The Third Phase of the RSC Community Portfolio V3 has us closing in on a finalized portfolio allocation before we consolidated onto the highest quality projects.

Our Current Allocation As Of Phase Three:

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The ReadySetCrypto "Top Ten Crypto" Community Portfolio (V4)


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What is the goal of this portfolio? 

The “Top Ten Crypto” portfolio is a democratically proportioned portfolio balanced based on votes from members of the RSC community as to what they believe are the top 10 projects by potential.
This portfolio should be much more useful given the ever-changing market dynamics. In short, you rank the projects you believe deserve a spot in the top 10. It should represent a portfolio and rank that you believe will stand the test of time. Once we have a good cross-section, we can study and make an assessment as to where we see value and perhaps where some diamonds in the rough opportunities exist. In a perfect world, we will end up with a Pareto-style distribution that describes the largest value capture in the market.
To give an update on the position, each one listed in low to high relative risk:
SoV/money == BTC, DCR
Platforms == ETH, XTZ
Private Money == XMR / ZEC / ZEN
DeFi == MKR / SNX and stablecoins
It is the most realistic way for us to distill the entirety of what we have learned (and that includes the RSC community opinion). We have an array of articles that have gradually picked off one by one different projects, some of which end up being many thousands of words to come to this conclusion. It is not capitulation because we all remain in the market. It is simply a consolidation of quality. We seek the cream of the crop as the milk turns sour on aggregate.

Current Top 10 Rankings:



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