There's a thesis for pretty much everything, and that's a huge reason why the market hangs in there, even as so many big-time managers can't get comfortable with what they think is a Fed-engineered stock market recovery.
We often hear about "the bull case" and "the bear case," and, given that rates are so low, it is easy to say that the bear case is simply that one day the Fed will decide this must all end. But in the interim, I think the bears are fooling themselves, because there are so many positive story lines out there that have nothing to do with the Fed, and they will be hard to topple. They are a big reason why after a huge day like Monday, we consolidate rather than give up the ghost.
The first and most obvious is the reopening of America. It's a rolling positive bull theme, as we keep hitting milestones of vaccination. When you hear it, you want to book tickets, you want to go somewhere and the airlines are, like so many other industries, caught unawares when it comes to demand. Their reluctance to expand makes sense. They cut back hard and didn't see much hope to a return to travel any time soon. Not now. The airlines, which had held in, are now starting to make a serious move. Southwest (LUV) has had a strong comeback, but now it is widening to outfits like United (UAL) , Delta (DAL) and American (AAL) . It's almost like these stocks are being bought by individuals who can't get on the plants because everything is getting booked up.
The bull market in cruise lines is back, now that the president has blessed trips to Alaska. If you think that the increases in the stocks of Royal Caribbean (RCL) , Carnival (CCL) and Norwegian Cruise (NCLH) are over, think again. These stocks have nine lives and they are on about live five.
Don't forget the amazing return of the casino gambling stocks. I like MGM (MGM) , but love the stock of Wynn (WYNN) , a quintessential Vegas-Macau story that is just now starting to make its move. The destination thesis was nicked by the unfortunate Disney+ (DIS) , report, but it would have been kept alive if people had just focused theme parks. I think that both Six Flags (SIX) and Cedar Fair (FUN) have more to run.
I don't want to get too far ahead of the story, but you have to wonder when Boeing (BA) is going to announce some big orders. The airlines are like farmers who, when flush, buy John Deere (DEER) tractors. These guys buy Boeing planes. That doesn't translate to immediate earnings, but earnings follow, so it's a good reason to buy the beaten up airplane maker.
The reopening trade comes in so many styles and flavors that it's like a forest fire, it keeps spreading and is very hard for the bears to put out. In the last week we have seen big gains from the shopping mall and shopping center stocks. These were supposed to be stripped of their dividends and left for dead. Nope, they are being bought, not just by stock in investors but by the companies themselves.
The banks are viewed as opening trades as of late as the economy seems to inspire a belief that there will be economic activity that will require loans and that the Fed will be forced to take rates up eventually helping their bottom lines. There's been nothing but relentless buying of the big banks to the point that, for the first time in about 25 years, there is what some are calling a once-in-a-lifetime ability to buy the stocks before the Fed relinquishes all control of their ability to pay larger dividends and buy back stock. That could come as soon as the end of June and the positioning ahead of that is pretty aggressive. Fear of missing out -- FOMO -- for banks is a new thing. It happens daily.
Then there are the relentless cycles that keep surfacing, cycles that carry whole industries with them. We don't talk enough about the agriculture cycle, but when you go over the widely-overlooked Deere call from Friday, you will see that the ag cycle may be the greatest in a decade. Some would argue it is the greatest ever. You have Deere, Agco (AGCO) , the fertilizers and seed companies all going fantastically. They are buys on any weakness. It's a dream come true cycle because it could be just midstream.
We have the best steel cycle that I can ever recall with just a few players, Nucor (NUE) , Cleveland-Cliffs (CLF) and U.S Steel (X) to invest in. There's a lot of excitement about an upcoming special purpose acquisition company, Legato Merger (LEGO) , which is combining with old-timer Algoma, a Canadian flat-rolled producer. It's going to be a winner.
I am completely enamored if not jealous of the amazing health care insurance bull market: UnitedHealth (UNH) , Centene (CNC) , Cigna (CI) , Humana (HUM) and CVS (CVS) , which is Aetna, are simply saying welcome aboard and can be bought on any rare dip.
There's the revolutionary cycle that includes right now GameStop (GME) , which has started a gigantic rally ever since management decided to raise equity, by selling stock right into the maw of the Wall Street Bets crew. AMC (AMC) 's doing the same thing, staging a monster rally once it was able to raise capital on the backs of the Wall Street Bets team. I keep waiting for these guys to adopt another target, a company with a big short position that could use money as it went higher. My pick would be Beyond Meat (BYND) with a 22% short position and the chance for a giant expansion of their deal with McDonald's (MCD) . I can judge from my Twitter feeds that these happy-go-lucky investors who want nothing but for me to go away - are totally addicted and hang on my every word, so Beyond Meat, which fits the GameStop and AMC challenges to a T could be next.
Then there's the consumer product and drug stock bull market that has much to do with the endlessly declining dollar that will buoy earnings no matter what they be. I know that these companies have freight and plastic cost issues, but I think the latter are about to break - with the exception of chlorine- because the stock prices seem to have peaked.
Can we just accept the fact that the home building cycle, which was supposed to be over when the pandemic waned, hasn't played by the rules and keeps rocking. Every time someone suggests that it has to end, we learn that supply remains well below demand and that with rates lower than people thought, business is very strong. Lennar's (LEN) moving up D. R. Horton's (DHI) been great, Toll's (TOL) about to report and it is hard for me to think it will be anything but strong.
That has led to excellent gains for Williams-Sonoma (WSM) , RH (RH) , Wayfair (W) and Macy's (M) . This cycles shows no sign of waning whatsoever. Let me throw Target (TGT) in which has more housing traffic than most.
Then there's the mall store cycle, led by L Brands (LB) , but continuing with Gap Stores (GPS) and American Eagle Outfitters (AEO) , but now expanding to Urban Outfitters (URBN) and Children's Place (PLCE) . This is a cycle that few thought was even possible given the death of the mall and the ascendance of Amazon (AMZN) . But the strength in the stocks of Federal Reality and Simon Property foretold otherwise.
Finally there's another tech bull market that shows no signs of flagging: semiconductor capital equipment. It looked like it peaked for a moment with the decline in Applied Materials (AMAT) after an excellent quarter. But with the U.S. committed to building as many as seven foundries, something we will talk with Commerce Secretary Gina Raimondo on "Mad Money," the government-mandated demand is going to extend the cycle far longer than AMAT, Lam Research (LRCX) , ASML Holding (ASML) and KLA Corp. (KLAC) thought possible.
Just like America runs on Dunkin', the stock market runs on cycles. When you have this many running at once, it's difficult to clobber the market. In fact, it's a major reason why dip buying has and will continue to work and why you need to be ready to buy at the end of May and go away.
(Join us on May 26th for Real Talk, a special Real Money webinar featuring reopening portfolio picks from Chris Versace, Stephen "Sarge" Guilfoyle and Ed Ponsi. Sign up for the webinar to see them discuss and debate their portfolios.)