The Weekend Edition is pulled from the daily Stansberry Digest.
Another $550 billion of spending is about to enter the game...
On August 10, the Senate agreed on a bipartisan $1 trillion infrastructure bill, which approves $550 billion in new infrastructure spending (on top of the $450 billion that has already been approved).
As Stansberry NewsWire analyst Nick Koziol reported that day, the bill passed the Senate with a 69-30 vote...
All 50 Democrats voted for the infrastructure package, with 19 Republicans joining in. The bill provides investment for roads and bridges, expanding broadband access, upgrading America's electrical grid, among other things.
As Nick also noted, though, this bill is far from a done deal. Markets moved higher after the news, but the response was muted. And the bill's uncertain path through the House of Representatives is why...
The House is on recess until September 20. And House Speaker Nancy Pelosi (D-CA) has said that she will not take up the bill in the House until the Senate passes the Democrat-proposed $3.5 trillion spending bill.
And that bill will likely have to be passed through the reconciliation process, as it's unlikely that any Republicans will go for the spending package.
Neither bill may be passed for weeks, or even months...
But it does show that at least $550 billion of spending is very much on the table – either in reality or as a negotiating chip in greater spending discussions in the near term.
Generally, people feel the nation is due for an infrastructure upgrade. U.S. infrastructure received a grade of C- in 2020 from the American Society of Civil Engineers.
But still, let's bold-face the price tag... since we know many people in Washington, D.C. have become numb to big numbers and think they are the single answer to our problems. We're talking about $550 billion – in addition to the $450 billion already out there – to be spent over the next five years.
This all means more government spending thrown into an already-juiced-up market, more fuel for inflation, and another brick added to our long-term pile of debt.
Today, I'll share some wise ways to prepare for this accordingly. But in the meantime, we want to catch up on what's been worrying folks lately...
Everyone seems to be talking about the COVID-19 Delta variant...
Mask restrictions are back in many states and industries... Companies are changing their back-to-the-office plans... And this latest strain of the virus is infecting people who are filling up ICU beds... just like in spring 2020.
Fortunately, deaths haven't been following at the same rate, though they are picking up...
According to analyst Alan Gula in the August edition of our Stansberry Portfolio Solutions service...
As you can see, hospitalizations are rising quickly from their trough in June and are nearly back to April 2021 levels. However, the number of deaths is not rising nearly as fast.
Since we originally published the above chart on August 3, daily COVID hospitalizations in the U.S. have risen to 80,000 on average per day over the last week.
Daily COVID deaths in the U.S. have increased to just over 800 deaths per day, though that's significantly lower than the number during this past winter's "second wave." Each life lost is tragic, but the "divergence," so to speak, in hospitalizations and deaths is an encouraging sign.
It shows that the COVID-19 vaccines are working. Globally, folks have received nearly 5 billion vaccine doses, representing 32% of the world population who've received at least partial protection so far. More from the August 6 issue of our flagship Stansberry's Investment Advisory...
More important, this protection works. The best of these vaccines are more than 90% effective in preventing infection once you've received the typical two-dose regimen – and 99.9% protective in preventing deaths.
Still, while 70% of U.S. adults have received at least one vaccine dose, 30% have not. In all, less than half of the U.S. population is fully vaccinated – so even with nearly all COVID-19 hospitalizations being among the unvaccinated, that's still a lot of people who can get sick.
Vaccination rates have also risen since Delta cases have emerged. As of August 5, the number of new vaccinations had doubled since July to roughly 441,000 per day, according to the Centers for Disease Control and Prevention.
At the same time, there's been an alarming rise in "breakthrough" infections among the fully vaccinated. And kids under age 12 aren't yet eligible to get vaccinated, creating an entirely new set of questions and concerns when schools and day cares reopen nationwide.
We also don't really know the full long-term economic consequences of more people getting COVID, which could cost money, health, and production down the road, apart from the short-term hospitalization crunch.
Here's the long and the short of it...
According to our Investment Advisory team...
As investors, we're not predicting another major global lockdown... We're confident Starbucks coffee will be poured. Big Macs will be eaten. All the tech firms that did well during the COVID-19 epidemic should continue to outperform. Travel will continue. And while some businesses like dine-in restaurants, bars, and large indoor venues will founder, the economy as a whole will drive forward.
But there will be runs of volatility moving ahead...
Still, there's a lot we don't know about the Delta variant and its effects. Investors can easily fear the worst when they see rising cases or isolated economic effects. And even if more folks start getting vaccines, it would likely take two to three months for vaccinations alone to reverse the rising rate of infections.
That's why we expect more volatility in all corners of the markets in the coming months. And we wouldn't be surprised to see a broad market sell-off.
Moreover, if the death rate rises, that could lead to the return of more travel restrictions and other safety protocols... which would threaten the economic recovery. If that does happen, we'll be ready to take advantage of any opportunities in the market.
This time last year, investors were expecting a full-fledged recovery once vaccines were made available...
Now we sense a new reality sinking in – that COVID will likely be around in some form for years ahead.
A few of our editors have said COVID could end up being like the flu, with different strains emerging in different parts of the world over time... and with different vaccine boosters needed every year or so.
Despite all this uncertainty, we're still in a bull market...
All of the negative fiscal and COVID news hasn't hampered the benchmark S&P 500 Index or the good ol' Dow Jones Industrial Average. They both continue to trade at all-time highs...
As of Thursday's close, the S&P 500 is now up 17% in 2021... the Dow is up 14%... and the tech-heavy Nasdaq Composite Index is up 12.8%, including an 11% gain since its most recent mid-May lows.
Based on the data, there's no reason to think this slow churn higher in the broad U.S. stock indexes will not continue...
Back in June, Ten Stock Trader analyst Greg Diamond outlined the importance of tracking the iShares MSCI USA Momentum Factor Fund (MTUM). It's a blend of many of the top stocks within different major U.S. sectors, such as electric-car maker Tesla (TSLA), bank JPMorgan Chase (JPM), entertainment icon Disney (DIS), digital-payments company PayPal (PYPL), and biotech and COVID vaccine maker Moderna (MRNA).
Tracking this fund and the trends it represents is important because, as Greg said, it filters the daily noise... and it shows that there is still bullish "momentum" in enough pockets of the markets to move things higher overall.
Greg says this fund is starting to follow one of the two bullish scenarios he outlined in June. In his August 9 Weekly Market Outlook to subscribers, Greg shared this chart...
The blue lines mark a big consolidation phase that started earlier this year. The convergence of the upper and lower blue lines usually marks a big move out of this phase, and as of last week, you can see that the fund is starting to break higher.
On the other hand, perhaps there is another pullback into this consolidation pattern, Greg says. In short, that tells him that it's another opportunity to buy...
Look how the lower trend line of this pattern is nearly perfectly lined up with the 200-day moving average ("200-DMA") in red. This is what following trends and understanding support is all about – and it's quite simple analysis. Unless the lower level and the 200-DMA are broken, you must remain with this trend higher...
I've kept it simple this week. But the point is quite clear: Stick with this momentum until the market tells you to stop.
Greg acknowledges that this is a "rare market"...
As a technical trader, he likes to follow the numbers and trends to take costly emotion out of investing. But he's well aware of the unprecedented macroeconomic environment we're living in today...
As Greg said...
There are unlimited easy money policies with government subsidies as far as the eye can see... combined with low interest rates in a global pandemic that seemingly has no end.
We've seen nothing like this before – and we may never see anything like it again...
I view this market environment like an elevator ride – smooth on the way up with just a few stops here and there, and everyone for the most part is happy.
He continued...
This is a rare market, and one day it will cease to be an elevator ride and return to a more volatile environment... And when we think about the current leverage accumulating in this environment, it is unprecedented to say the least.
He left subscribers with a thought and a passage from legendary trader Paul Tudor Jones from his interview in Market Wizards about the 1987 crash, and it's too good not to share with you here today...
Everything gets destroyed a hundred times faster than it is built up. It takes one day to tear down something that might have taken 10 years to build. If the economy starts to go with the kind of leverage that is in it, it will deteriorate so fast that people's heads will spin... I know from studying history that credit eventually kills all great societies. We borrowed against the future, and soon we will have to pay.
We're talking about unlimited money supply, low interest rates, and governments and central banks throwing more money (credit) into the global economy than at any time in the history of civilization...
Greg doesn't think this time is different. But for now, it's not time to get off the elevator just yet.
All the best,
Corey McLaughlin
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