Stock indices all over the world pushed higher in August in the biggest market bonanza in decades.
The MSCI World index of stocks in developed nations jumped 6.6% in August. That was the sharpest rally for that month since 1986.
The average move for that index over the past 44 years in August is half that size.
Here in the U.S., the S&P 500 index was up 7%.
However, the better gains so far in 2020 were gotten by investors that did their pandemic homework. Let me give you an example. . . . .
The U.S. hotel industry took in a record $168 billion in sales in 2019, according to data firm STR.
But after the pandemic brought global travel to a standstill, the hotel industry will be lucky to get half that in 2020.
Two key industry measures – occupancy rate and revenue per available room (Revpar) – are on track for the biggest annual drop ever recorded.
So, the hotel business is a lousy business, right? Investors should stay away? Wrong!
One segment of the industry is doing fine: extended stay hotels.
Larger rooms with fully equipped kitchens and self-service laundry have proved popular with coronavirus staycationers looking for a holiday break without any flights.
The rooms – priced for budget-conscious travelers – are more popular than those at swanky hotels.
Some investors have already picked up on this trend. They have bid up the prices of smaller hotel companies that focus on budget travelers.
Shares of Wyndham Hotels and Resorts, the company behind the La Quinta and Howard Johnson chains, have surged more than 140% in price from their March lows to trade near pre-pandemic levels.
The stock prices of other budget hotel specialists, Choice Hotels and Extended Stay America, have doubled or nearly doubled over the past five months.
This trend should continue for the foreseeable future.
The Big News
The Russian government admitted that coronavirus cases there have surpassed one million.
Coronavirus Will Survive Longer Outdoors in Autumn
Researchers from Kansas State University found that, in lower temperatures and humidity, the virus could remain on surfaces for a week. It would remain infectious for that time. In contrast, during the summer, the virus could survive only one to three days.
A Bus Ride Turns Into a Superspreader Event
A passenger on a bus from Hubei (the epicenter of the virus in China) was found to have infected 24 fellow bus passengers. Many became ill. The only ones to escape the virus were the lucky passengers seated near an open window or near a door.
Hawaii Has a Problem
The tropical paradise state of Hawaii is trying to stop a coronavirus surge that began in mid-August. It is now requiring visitors and residents arriving on the islands to register online beforehand.
Walmart Going All In On e-Commerce
Last quarter, Walmart’s e-commerce sales doubled. Walmart hopes to increase that with the launch of its subscription service, Walmart+. Subscribers pay $98 a year, or $12.95 a month, to get free shipping on 160,000 items, including groceries ($35 minimum order). Walmart subscribers also get discounts on gasoline from affiliated stations. Amazon charges $119 for its Prime subscription service.
Walmart and TikTok
Walmart could turn into an online advertising leader if its plan to acquire popular short-form video app TikTok goes through. Walmart’s acquisition would be in conjunction with Microsoft. The proposed purchase would allow Walmart to quickly compete with Amazon, Facebook and Google for eyeballs on social media, reaching customers across virtual and physical sales channels. Walmart promoted its ad business to large consumer goods companies and advertising firms for the first time last year.
WSJ reports that Airbnb plans a secret +$18 billion IPO. That means the Silicon Valley giant is keeping details 100% confidential. Get details here: Inside Airbnb’s Confidential IPO.
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The Coronavirus Numbers
Here are the numbers from Wednesday at 8 a.m. ET from Johns Hopkins University:
- 25,784, 154 Infected Worldwide
- 857,794 Deaths
- 6,076,280 Infected in the U.S.
- 184,697 Deaths in the U.S.
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The more the stock market rises, the more cautious you should be as an investor. After all, COVID-19 has not gone away.
VIX futures: The so-called “fear gauge” is waving a caution flag. The futures have started to grind higher despite stocks’ ongoing rally.
Also, short sellers are disappearing. Those who would normally short the market on concerns of excessive valuations appear to have no desire to be steamrollered once again. It’s all thanks to favorable liquidity from the Fed and the strong “buy-the-dip” sentiment that comes with that.
This has also been very noticeable over the past few weeks . . .
The fear of missing out on an unending equity rally has increasingly been expressed through massive call option purchases by retail investors. In the past, this has preceded a correction.
However, there are always opportunities like the aforementioned hotel stocks.
The biggest winners in the coming months will NOT be regular stocks. Instead, they’re likely to be the new IPOs and Pre-IPOs.
Yours in Health & Wealth,