Good Evening Days like today, I'm reminded of a million-and-one motivational quotes and cliche posters of a cat hanging onto a branch...hang in there! A lot of investors could probably use the encouragement. Unfortunately, my inner Churchill isn't working today. I've got no words of wisdom but to say, I've been investing for more than 22 years and worked as an analyst for more than a decade. I've been through three major crashes and countless corrections. It's the investors that hold on, don't panic and keep their investments in strong companies that will be rewarded. Think about this, even for those investors that bought at the very peak of 2007 and saw their investments plunge 55% to March 2009...if they held on, would have still made an 8% annualized return to this year and would have more than doubled their money!

Let's Talk Money!

MARKETS

	NASDAQ	12,609	- 2.41%
	S&P	3,821	- 0.54%
	DOW	31,802	+ 0.97%

• Markets:  The three indexes opened relatively strong considering the 10-year Treasury jumped to 1.6% at the open. The $1.9 trillion stimulus took a leap forward to passage, vaccinations are continuing on pace and the House of Mouse got news that California would soon allow DisneyLand to open. Alas, it couldn't last and it goes to show the interest rate story is the only important one to stocks right now. Even stimulus of nearly 10% the size of the economy cannot help tech stocks as rates jump higher. It's likely to be that way for much of the year and could get worse if we see signs of increasing inflation...but more on that later.

BEST AND WORST SECTORS

• Sectors: Nine of the 11 stock sectors finished higher on the day and it was actually a fairly good day for most of the market. The problem is that the S&P 500 is dominated by Tech and the kind of high growth stocks that are getting hit lately. For as long as Tech and Communication Services stocks feel the pain, it will be very difficult for the index to close higher.
• Sector Trends: The reflation trade was in full force today with stocks in Materials, Industrials and Financials all outperforming by a wide margin. Energy underperformed on weakness in oil prices though it's on a 40% gain in the sector year-to-date. One interest note was the strong performance in Utility stocks, especially against surging interest rates. It may be value investors swooping in after the sector's 4.8% loss so far this year or something more but keep an eye on it.

TOP STOCKS

• ViacomCBS jumped on news that Oprah's interview with Meghan and Harry drew 17.1 million viewers, a total normally only reached by major sporting events. I'm left thinking though, is it a one-off or can the company monetize those viewers or convert them into a more regular audience?
• Capri Holdings benefited from the building investor sentiment for reopening stocks and the hope that some of the coming $1,400 checks will be spent in the most lavish way possible...and quickly. Seven of the top 10 stocks in the S&P 500 were retailers or others in the reopening theme.
• Macy's also rose on relatively little new information or news. These harder hit stocks and the riskier bets are going to be the ones that do well when the reopening theme has its best days though longer-term investors may still want to focus on the stronger companies that can rebound and keep that pace going through this year and next.

Economy

It’s Nice when Your Favorite Economist Agrees with You

The stock market and many economists still aren’t sold on the runaway-inflation story. At best, many believe we could get a quick bump in prices during the summer before inflation quickly falls back to the Fed’s target of 2% or even lower. Given recent commentary from members of the Fed, they’re certainly not worried.

But Monday, Moody’s Analytics chief economist Mark Zandi (probably my favorite economist for nearly a decade now) sounded the alarm saying Wall Street is significantly underestimating the seriousness of an inflation comeback and that, “I don’t think there’s any shelter here.”

I’ve been watching the inflation numbers for a few months and it was a big factor to why we shifted into Energy and Financials back in November. You just can’t shove $7 trillion-plus into the economy through stimulus and monetary policy without pushing prices higher. Now we hear that households have upwards of $2.5 trillion in additional savings that could flow into consumer spending over the rest of the year...prices are going to shoot through the roof!

This is the reflation trade we talked about in Sunday’s livestream and why the run in Energy stocks, Materials and Industrials is likely to continue. It means any asset that can hold its value like commodities, precious metals and even bitcoin could have a very good year. Higher inflation also means a weaker dollar so look for companies with more sales overseas and avoid REITs and Utilities.

Stocks

Want in on the Silicon Valley Venture Capital Money?

Salesforce is one of my largest single-stock investments. Besides being a leader in many of the big trends I follow including AI, digitization and cloud SaaS...the company has become something unexpected but hugely profitable for investors. A Venture Capital Fund.

Salesforce and CEO Marc Benioff aren’t just big buyers of tech but have turned the company into an investor of early-stage startups as well. On recent IPOs like Snowflake, Auth0 and Zoom, the company reported a $2.17 billion gain from its early investments as private funding for the startups. In fact, the company’s investments have been so successful that nearly half (40%) of fiscal 2021 earnings came from gains on strategic investments.

For anyone that has seen headlines of Peter Thiel’s 1000% return as a pre-IPO investor in Facebook or Andreeson Horowitz’s famous venture returns...it’s a great way to get in on the action. Shares of Salesforce are down 26% in the tech selloff and now trade at 42-times earnings. That’s down from 58-times on a PE basis in January and I’m selling more puts at the $200 strike price. I’ll collect the $23 premium for the puts and ‘worst’ case scenario, my cost basis will be $177 per share.