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We expected a bounce after Monday's historic rout and the afternoon White House press conference promising relief for the Airlines and other quarantine-impacted companies. As always, the real excitement was in the details.

 

Yesterday's biggest winners included Electronic Commerce and Delivery companies. Walmart (WMT), United Parcel Service (UPS) and CVS (CVS), which just opened up free prescription delivery to all customers, all soared. Pet Food Delivery company Chewy (CHWY) jumped a full 15% while Amazon (AMZN), one of our long-term recommendations, rebounded 7% as well on news that it is essentially at organizational capacity. Jeff Bezos has stopped accepting anything but essential products in his warehouses. He'll sell the books, toys and other discretionary merchandise he has, but otherwise it's now all about food, medicine and household products.

 

That's huge. It means that enough people are shopping from home that even Amazon is hitting its limit. The warehouses are full. While dealing with all the orders is going to be a strain, it's not a bad problem to have.

 

And the third-party sellers Amazon is turning away will go to Shopify (SHOP), which surged 10% yesterday. If you want to buy anything but essentials once Amazon runs out of stock, you'll need to go to a Shopify store. Likewise, sellers will need to use Shopify technology to take advantage of this unprecedented online shopping wave. Brick-and-mortar stores are out of key items throughout their supply chains. As third-party vendors step up to meet demand, Bezos has ensured that they'll work with Shopify. After all, if you sell canned food, you already compete directly with Bezos and his Whole Foods operation. Why work with a direct rival if there's an alternative?

 

So it's nice to see the Retailers sort themselves out. We also have to shout out Dollar Tree (DLTR), up close to 15% yesterday. That company sells the small things Amazon rarely bothers to stock. They'll do well in this environment. As we've said, if anyone is out shopping in physical stores, odds are good that a trip to Dollar Tree is as far as they'll go.

 

Beyond Retail, we're seeing constructive signs of the economy showing real backbone. The entire Treasury yield curve is now lined up on a normal slope for the first time since the first inversions appeared at the end of 2018. Short-term debt pays low rates. As you move out toward longer-denominated bonds, interest rates rise. That's how the funding market works in a healthy environment. Even if we discount this as a symptom of the Fed's massive intervention in the credit markets, it's a good thing. The Fed is getting what it wants.

 

And this is a great thing for our High Yield recommendations, which generally depend on borrowing cheap and lending at higher rates. The low end of that transaction is now extremely low, with one-month Treasury bills now paying just 0.12%. The high end remains depressed, but with 30-year bond paying 1.63% there's now a 1.5% differential for Financing companies to exploit. In our view, the worst is over for companies like Annaly Capital Management (NLY). Lock in yields now . . . Annaly has been beaten down to the point where it pays 15% a year.

 

Finally, we've revised our earnings targets to reflect what could be a significant economic stall in the current quarter. Thursday morning's unemployment claims report will be closely watched. We wouldn't be shocked to see new claims jump from barely 200,000 to 2 million or more. After all, entire Restaurant chains have shut down across the country. In New York City alone, that's up to 900,000 people.

 

The S&P 500 is currently suffering through another quarter of negative earnings growth, in this case seeing a 4% decline from last year. That hurts, but after a year of flat fundamentals it isn't shocking. Investors are used to it. Moreover, with the Fed cutting short-term rates to zero, there's a lot of room for multiples to expand.

 

What we've seen, on the other hand, is stocks falling faster than our 2020 earnings target. The market as a whole currently commands a 14X multiple on the profit we expect. That isn't expensive at all in a zero-rate world. And that means there's a reason here to start buying . . . once we see that a 4% anticipated decline doesn't turn into a complete catastrophe. We're watching the government every day. The Senate stalling on the stimulus package overnight will hurt the market mood today, but when we finally see progress, the scenarios get a lot better. Hang in there.