Market Insights & Analysis from Kramer Capital Research

The Bulls Are Running In 2021: Don’t Get Left Out (But Don’t Get Trampled)

Wall Street made a lot of money in 2020 despite extremely challenging circumstances.

Now, investors are looking to extend their gains into a new year and a new political cycle. The first lesson we’ve learned this week is that an extremely narrow Democratic Party control of the federal government for the next few years is not an automatic sell signal.

No matter how you feel about the way the votes stacked up around the country, we don’t invest with our feelings. We trade the cards the market deals us.

Those cards are balanced to the upside. The S&P 500 is up nearly 2% already this year. A few of my portfolios, like IPO Edge, have beaten that strong opening return by 10-11%.

Will it last beyond the inauguration and into the new Congress? None of the winds of Wall Street are blowing in that direction yet. And that’s not a terrible thing.

Anticipation Outweighs Dread

Tax rates and regulatory red tape have probably been rolled back as far as they can be in the current cycle. From here, we’ll see the drag build until the next round of cuts.

Nobody likes it. But as long as the pivot is mild, slow and centrist, corporations and investors alike will be able to navigate around the challenges to grab plenty of opportunities.

That’s the set-up we have in Washington right now. Control of both chambers of Congress is now extremely narrow, with enough moderates to veto any extreme moves in either direction for the next two years.

Radical proposals that get through the House of Representatives will go on hitting a wall in a Senate where centrist Republicans and centrist Democrats have more in common with each other than with their nominal colleagues on either side.

Sen. Joe Manchin of West Virginia is arguably the most powerful Democrat in Congress now because he has the power to say “no” to any bill that goes too far to support renewable energy at the expense of the coal miners who vote for him.

He has never been a friend of the extreme wealth redistribution rhetoric. Keeping him happy is now a top priority for both parties as they try to get things done.

And there’s a lot to do. One reason some stock investors are cheering the Senate shift is that we’re still facing a pandemic and a potentially crippling recession. New ideas are welcome.

Today’s job creation numbers were not good. The recovery has faltered to the point where 372,000 restaurant and bar workers were laid off again in December. All in all, it looks like the last stimulus package came a little too late.

Wall Street would rather see more lavish stimulus than fiscal restraint right now. Stabilize the economy and then clean up the consequences.

If the new Senate will do that, investors will have a few years to make money before the hangover kicks in. You can see this playing out in the big banks right now.

As I told TD Ameritrade this week, the financials are my top sector pick of the year. This is why. (Click here to watch the video.)

Bank executives know how to operate in a zero-interest-rate world. They’ve done it in the past and can do it again, as long as consumer credit doesn’t implode in the meantime.

Giving consumers cash to pay their bills is a pretty sure way to avoid that kind of balance sheet disaster. And in the meantime, the Fed is still handing the banks as much cash as they can handle, no questions asked.

It has been a great week for the banks, believe it or not. JP Morgan Chase & Co. (NYSE:JPM) is up 7%, in line with some of my best stocks, despite being a gigantic company.

Bank of America Corp. (NYSE:BAC) is up 8%. Wells Fargo & Co. (NYSE:WFC) has rebounded more than 10%.

As I’ve been telling you, this is where the action is. The Big Tech giants that dominated Wall Street last year are slumping.

Amazon.com Inc. (NASDAQ:AMZN) is down. Old-fashioned Walmart Inc. (NYSE:WMT) is up.

This might be an old-fashioned year for the bulls. We just have to get more than a week into it to be sure.

I’m talking about it on my Millionaire Makers radio show. Now there’s a podcast (Spotify)(Apple) as well to keep you focused on opportunities to build real wealth while avoiding obvious threats.

CANNABIS CORNER: Regulatory Risk Recedes

Cannabis enthusiastically applauded the Georgia vote. A few more senators in either direction won’t necessarily help the industry, but the threat of an unfriendly Department of Justice cracking back down seems extremely remote now.

Laws recriminalizing cannabis are not going to get passed for at least another two years. Instead, we may see a few tentative efforts to lighten the regulatory load.

That’s a good thing for the cultivators, and they’re all leaping to greet the new year. Canopy Growth Corp. (NASDAQ:CGC) may even be my favorite right now.

But Tilray Corp. (NASDAQ:TLRY) and especially Innovative Industrial Properties Inc. (NYSE:IIPR) are right behind it as far as big companies go.

IIPR is especially interesting, because it doesn’t grow or sell the plant. It is a real estate investment trust (REIT) that has been set up to own the cannabis-growing facilities, charge rent and pass the income on to shareholders.

Yes, it pays a 2.8% dividend, which is otherwise extremely hard to capture in this space.

And I’ve got to shout out the tiny next-generation cannabis stocks on my IPO Edge buy list. While established pot portfolios are still trying to pull it together after a few miserable years, these stocks are soaring.

We’re up 40-80% on these stocks since the election. What’s not to love?

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