Health Insurance Stocks Near A Record High (No Bernie Worries)

New Record For Stocks Despite Coronavirus

With the S&P 500’s 0.17% increase on Tuesday, it hit yet another record high. It’s up 3.93% year to date which is just 7 basis points below my original full year price target. U.S. stock market is being boosted by the expectation that the U.S. consumer will power the economy through the weakness created by the coronavirus. And that once the coronavirus’ impact wears off, the global cyclical recovery will take hold.

Coronavirus continues to take lives as most of the latest cases and deaths have been in the Hubei province (its capital is Wuhan). Latest update showed an additional 97 deaths and 2,015 cases. Total is 1,113 deaths and 44,653 cases. It’s clear this virus is winding down and won’t become a pandemic, but until it’s fully gone, it will negatively impact economic activity. 

Hubei is a key providence in the production of several products. It has 39.4% share of China’s phosphorus mining, 11.9% of cloth, 8.9% of cars, and 7% of beverages. The chart below shows the economic toll of the coronavirus. As you can see, world Q1 GDP growth will be hurt by 0.416%. Most countries are below that because this chart doesn’t include China itself.  U.S. is expected to be hurt by 0.116%. Obviously, this is only one estimate, so it’s far from fact.

Review Of Tuesday’s Action

Nasdaq was up 0.11% and the Russell 2000 was up 0.59%. VIX was nearly unchanged as it increased 0.14 to 15.18. CNN fear and greed index is only at 56 which is barely in greed territory. It fell 1 point. Volatility a couple weeks ago has prevented this market from being froth. Even though it still has strong momentum and is at a record high. If the 2020 election doesn’t slow it down, nothing will.

There was a bit of divergence in the sector performances. Communication services and consumer staples were the worst performers as they fell 0.61% and 0.36%. Energy and real estate did the best as they increased 1.04% and 1.22%. Energy was helped by the rise in oil. WTI was up 0.9% to $50.39 as the number of new coronavirus cases slowed to the lowest level since January 31st. It seems like the February economic data will be the most impacted by this virus. We should see a recovery start in March.

It’s notable that the IHF healthcare ETF rose 1.57%. It’s up 7.02% since the end of January and is 0.59% from its record high. It’s clear investors are ignoring the possibility of Sanders winning the presidency even though he leads the betting odds in the Democratic primary. 

CRB core commodity ETF increased 0.44% as it is down 8.54% year to date. It will be interesting to see if commodities start to rally in the next few weeks as Chinese demand picks up again. 10 year yield is still very low as it’s at just 1.61%. An argument the bears have made that the low/falling 10 year yield means the economy is weak. Which means stocks should fall, hasn’t worked for about 14 months. 

CME Group website shows there’s a 79.4% chance of a Fed rate cut in 2020. I continue to call for 1. 2 year yield is at 1.44% as this expected rate cut has helped avoid another 10 year 2 year inversion.

Latest Democratic Polling

Let's look at the latest Democratic polls. There were 3 national polls released. Sanders was up by 10% and 3% in two polls over Biden. In one Biden was up by 3% over Sanders. Biden has clearly lost significant momentum because of his poor showing in Iowa. His weakness in New Hampshire will provide more negative momentum. 

At this point he’s a spoiler for the other moderate candidates. That’s an impressive fall since he led almost all national polls before the voting started. If he doesn’t leave the race, he will hurt other moderates in the South which is where he does the best.

Another interesting poll was the one from Arkansas which shows Bloomberg up by 1 point over Biden (20% vs 19%). Sanders and Pete were tied at 16%. This is the first poll I’ve seen Bloomberg winning in. It gives a potential picture of what could happen if Biden drops out. 

Bloomberg might do well in the South which is interesting since he’s from New York. This is likely because the other moderates, Buttigieg and Klobuchar don’t do well in the South (outside of the fading Biden). It’s also notable that Bloomberg now has 3 of the 4 national polls necessary to make the February 19th debate. He has a week left to get more than 10% in a qualifying poll.

Bernie Wins New Hampshire Primary

Bernie won the New Hampshire primary by a little less than 2%. Second was Pete and 3rd was Klobuchar. This was an interesting race because even though Bernie won by less than his polling average, this election helped his odds of being the nominee. Mostly because of Amy doing well muddies the moderate field. Specifically, the average of polls had Sanders winning by 7.4%. Amy outperformed her polling average by 8 points.

If Amy didn’t outperform, Pete Buttigieg might have won. This symbolizes the whole race as Sanders is dominating the progressive lane of the race since Warren is fading very quickly. However, the moderates have a fading Biden, Amy, Pete, and Bloomberg all competing for the same voters. 

None of the moderates will drop out soon which can help Sanders win the plurality of the delegates. This explains how Sanders underperforming his polling average by about 2 points in New Hampshire helped his odds of winning the nomination increase 4% to 49% according to PredictIt.


Moderates appeared to be coalescing around Pete Buttigieg after the Iowa caucus. However, with Amy Klobuchar doing well in New Hampshire, it muddies the moderate lane of the party which increases Bernie’s odds of winning. 

Case in point, Klobuchar’s odds of dropping out by Super Tuesday fell 12% to just 25%. Despite Bernie’s win, the health insurance stocks have done well. Probably because investors think Donald Trump will be re-elected. President Trump has a 53% chance of winning re-election according to PredictIt. 

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