Author: Dorian Holden

The threat of war is back.

Just days ago, President Trump said Iran “will pay a very BIG PRICE” after protesters attacked the U.S. embassy in Baghdad, demanding that American troops withdraw.  All after U.S. strikes against Tehran-backed Kataib Hezbollah killed at least 25 people.

At the time, Iran didn’t take the threat seriously.  

“Firstly, you can’t do anything and secondly, if you were logical—which you’re not—you’d see that your crimes in Iraq, Afghanistan… have made nations hate you,” said Iran’s Ayatollah Khamenei, as quoted by Newsweek.

The U.S. then followed up with an airstrike that killed Iran’s top general.  

“While Iran will never be able to properly admit it, Soleimani was both hated and feared within the country. They are not nearly as saddened as the leaders will let the outside world believe. He should have been taken out many years ago,” said Trump.

As a result of the escalation, oil prices are rocketing higher, last trading at $63.58.  The Dow is down 240 points. The S&P 500 slipped 25, with the NASDAQ down 78 points.

Some of the top energy stocks moving higher include:

SPDR Energy Select Sector ETF (XLE)

The Energy Select Sector SPDR Fund seeks to provide investment results that, before expenses, correspond generally to the price and yield performance of the Energy Select Sector Index.  It also seeks to provide precise exposure to companies in the oil, gas and consumable fuel, energy equipment and services industries.  

Invesco DB Oil Fund (DBO)

This ETF seeks to track changes, whether positive or negative, in the level of the DBIQ Optimum Yield Crude Oil Index Excess Return plus the interest income from the Fund’s holdings of primarily US Treasury securities and money market income less the Fund’s expenses.  It trades WTI crude futures.

iShares Global Energy ETF (IXC)

The iShares Global Energy ETF seeks to track the investment results of an index composed of global equities in the energy sector.  Trading at $31, some of its top holdings include Exxon Mobil, Chevron Corporation, BP PLC, Total SA, and EOG Resources.

The threat of war is back.

In a series of tweets, President Trump said Iran “will pay a very BIG PRICE” after protesters attacked the U.S. embassy in Baghdad, demanding that American troops withdraw.  All after U.S. strikes against Tehran-backed Kataib Hezbollah killed at least 25 people.

While they dispersed, tensions are boiling over with Iran over this situation.

However, Iran isn’t taking threats seriously.  

“The Iranian government, the Iranian nation, and I strongly condemn the US’s malice,” said Iran’s Ayatollah Khamenei, as quoted by Newsweek. “That guy has tweeted that we see Iran responsible for the events in Baghdad and we will respond to Iran.”

Firstly, you can’t do anything and secondly, if you were logical—which you’re not—you’d see that your crimes in Iraq, Afghanistan… have made nations hate you,” he added.

We May also See the Return of Rocket Man

North Korea’s Kim Jong Un said he was no longer bound by his “pledge to halt major missile tests and would soon debut a ‘new strategic weapon,’” as highlighted by Bloomberg.  “The world will witness a new strategic weapon to be possessed by the DPRK in the near future.”

Following that news, former National Security Adviser John Bolton tweeted the U.S. should “fully resume” military exercises with South Korea in response to Kim’s threat.

Along with trade tensions, coming U.S. elections, and further impeachment chaos likely, 2020 could be an extremely volatile year.  If that’s the case, some of the best stocks to watch include:

ProShares Ultra VIX Short-Term Futures ETF (UVXY)

The ETF was designed to match two times (2x) the daily performance of the S&P 500 VIX Short-Term Futures Index. 

VelocityShares Daily 2x VIX Short-Term ETN (TVIX)

The TVIX is another great way to trade elevated volatility.  This ETF  tracks an index of futures contracts on the S&P 500VIX Short-Term Futures Index.

iPath S&P 500 VIX Short-Term Futures (VXX)

The VXX ETN provides exposure to the S&P 500 VIX Short-Term Futures Index Total Return.  As volatility shoots higher, so does the VXX.

After a record-setting 2019, markets are off to a monster star in the New Year.

Should the rally continue for the next four sessions, we could be in for another great year, according to the “First Five Days” indicator, according to CNBC.  In fact, when stocks finish the first five days higher, the S&P 500 has been positive “more than 80% of the time at year-end with an average gain of about 13%, according to the Stock Trader’s Almanac.”

January also features the “January Barometer.”  Typically, a great start in January could mean a higher year for markets.  Remember, “So goes January, so goes the year.”

However, there are no certainties just because January starts off well.

With a busy year ahead, we could see a great deal of volatility thanks to the following:

No. 1 – Trade War Issues

Markets have priced in a lot of trade war progress over the last few weeks.  Once the phase one deal is signed later in January 2020, we could see a sell the news reaction until we hear more about the phase two part of the trade war deals. 

“I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15,” Trump tweeted. “The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two!”

No. 2 – 2020 Presidential Elections

Presidential elections always carry a great deal of risk and volatility. 

In the 2004 election (Bush v. Kerry), the VIX jumped from 13 to 17 prior, as the Dow Jones fell from 10,400 to 9,700.  In 2008 (Obama v. McCain), the VIX ran from 20 to 90, as the Dow Jones crashed. In 2012 (Obama v. Romney), the VIX jumped from 13 to 20.  

Then, in 2016 (Trump v. Clinton), the VIX ran from 12 to more than 22.

No. 3 – Impeachment 

While impeachment will remain a hot topic in the press, markets refuse to react to it.  In fact, many are resolved to believing it’s a dead story that will go no further than the House of Representatives.  Plus, until the House hands over the articles of impeachment to the Senate, there’s no impeachment.

On Jan. 15, President Trump will sign the “phase one” deal with China at the White House.  

“I will be signing our very large and comprehensive Phase One Trade Deal with China on January 15. The ceremony will take place at the White House. High level representatives of China will be present. At a later date I will be going to Beijing where talks will begin on Phase Two,” tweeted President Trump.

All after the U.S. and China reached a partial trade as the two attempts to de-escalate the long-lasting trade war.  Per the agreement, President Trump agreed to cancel some new tariffs, while China agreed to buy more U.S. agricultural products. 

At the moment, the U.S. has canceled tariffs that were set to take effect this month. However, we have left 25% tariffs of $250 billion worth of Chinese goods, but did cut existing tariffs on $120 billion worth of goods to 7.5%.

“That one’s in the bank, Joe,” said White House advisor Peter Navarro, as quoted by CNBC. “We’re just waiting for the Chinese translation of the 86-page agreement and I’m trying to figure out whether it’s going to be more pages or less in Chinese.  Next year, 2020, we’re going to try to get something going with Great Britain, Vietnam, Europe and anybody else who wants to fairly trade with the United States of America.”

What’s Currently in the Phase One Deal

So far, we don’t know much about what’s actually in the deal.

Neither side has provided many details.  What we do know is that planned 15% U.S. tariffs on $160 billion worth of Chinese goods have been taken off the table.  China also canceled its retaliatory tariffs, which included a 25% tariff on U.S. autos, as noted by Reuters.

The U.S. also said China has agreed to increase its purchases on products and services by up to $200 billion over the next two years.  While making no mentions of hard targets, China said it would import more wheat, rice, corn, energy, and pharmaceuticals. 

In addition, there is allegedly a deal for stronger Chinese legal protections for patents, trademarks, and copyrights.  “The deal contains commitments by China to follow through on previous pledges to eliminate any pressure for foreign companies to transfer technology to Chinese firms as a condition of market access, licensing or administrative approvals and to eliminate any government advantages for such transfers,” as also noted by Reuters.

2019 was quite a year for stocks, but according to analysts 2020 maybe even better.

In fact, analysts, according to CNBC, believe some of the best stocks to watch in the New Year, including Nike, Apple, NVIDIA, and Zynga.

NVIDIA (NVDA)

Wells Fargo, for example, named NVIDIA as its top semiconductor pick for 2020 thanks to its gaming, automotive, and data center businesses.  “We see NVIDIA representing the most significant investor sentiment upside driven by our expectation of a meaningful reacceleration in data center growth through 2020,” says the firm, as quoted by CNBC.

Apple (AAPL)

Apple (AAPL) helped lead the way, rallying nearly 90% on the year.

Unbelievably, the New Year could be even better.  

Not only could Apple win the 5G market share race, it’ll benefit from the wider adoption of wearables.  Its Apple Watch, for example, accounts for nearly half of all smartwatch sales. Apple has plans to double its services revenue by 2021.  Services revenue currently accounts for 20% of AAPL revenue, up 16% year over year.

“We see Apple as one of top picks for 2020 given its favorable position to drive an outsized share of early 5G handsets and a strong iPhone volume cycle, and ensuing acceleration in the installed base and Services growth. … The rally in the shares had two big drivers, including: 1) Delivering to sell-side volume expectations for volumes in the 2019 iPhone cycle, but more importantly delivering upside to buyside expectations, which were expecting a lackluster replacement cycle for iPhones with limited hardware upgrades; and 2) Building expectations for a 5G led volume cycle with Apple expected to be a prime beneficiary,” says JP Morgan, as quoted by CNBC.

Nike (NKE)

After exploding from a 2019 low of $70.46 to a high of $100.75, analysts are still bullish.  

“NKE is our Best Idea as its innovation pipeline is robust ahead of the Summer 2020 Olympics amid a global secular trend toward more active/healthy lifestyles. We remain focused on the strong fundamentals and NKE’s focus on engaging with the consumer through all channels, globally, helping to offset geopolitical pressures. We see several catalysts ahead, most importantly the Summer Olympics, where we expect NKE to unleash its marketing budget and innovation pipeline,” says Guggenheim, as quoted by CNBC.

Zynga (ZNGA)

Since its January 2019 low of $3.88 to its current price of $6.14, ZNGA has been on fire.  

Analysts at Cowen note, “We are naming Zynga as our Best Idea for 2020. Zynga has proven itself to be the most consistent company in the mobile gaming vertical over the last few years, delivering steady growth both through organic efforts and smart M&A. With an exciting 2020 product pipeline, valuation remains attractive against our (likely conservative) estimates for revenue growth; we reiterate our $7 price target.”

What a year it’s been.  Year to date, the Dow has tacked on nearly 23% of upside in 2019, with the S&P 500 up 29%.  The NASDAQ is up nearly 36%. We may see even higher highs with Vice Premier Liu He set to sign off on the “phase one” trade deal later this week.  

Apple (AAPL) helped lead the way, rallying nearly 90% on the year.

Unbelievably, the New Year could be even better.  

Not only could Apple win the 5G market share race, it’ll benefit from the wider adoption of wearables.  Its Apple Watch, for example, accounts for nearly half of all smartwatch sales. Apple has plans to double its services revenue by 2021.  Services revenue currently accounts for 20% of AAPL revenue, up 16% year over year.

Advanced Micro Devices (AMD) had an impressive year of its own, too.

Since 2019 began, the stock has rallied 152% — and could also see higher highs.  

Analysts over at RBC just raised their target price to $53 “as data center demand ramps up and gaming sales come in better than feared, as we expect, this should lead to higher gross margins relative to current Street expectations,” as quoted by The Street.

Better, the company has plans to launch more 7-nm products that are expected to give a significant boost to the firm’s bottom line. Three, new gaming consoles from Microsoft and Sony Corporation are set for a late 2020 launch, and will both use AMD chips.  It also doesn’t hurt that AMD continues to gain market share from Intel. 

In 2020, look for the 5G boom to fuel higher highs in both stocks.  

U.S. markets may have had their best year on record.

To date, Dow Jones Industrials are up 25%.  The NASDAQ is up 38%. The S&P 500 rocketed higher by 31%.  From here, we could see higher highs with trade tensions dialed down.  Unfortunately, some stocks couldn’t keep up – and became the year’s biggest flops.

Fossil Group Inc. (FOSL)

After a poor outing in 2018, FOSL couldn’t pull it together in 2019.  Shares fell 54% on the year after a string of earnings disappointments.  In the third quarter for example, FOSL reported an 11% drop in revenue, and a loss of $26 million, as compared to a $5 million loss year over year. The company expects to see further sales declines of 5% to 10% in the current quarter.  

Abiomed Inc. (ABMD)

Shares of ABMD had a heart-stopping year, plunging 44% on the year.  All after questions about the usefulness of its Impella heart pumps were called into question.  

According to the Chicago Tribune, “The Impella device is associated with an increased risk of death, bleeding and stroke among patients undergoing angioplasty to re-open clogged arteries, two separate research teams concluded in presentations given in November at the American Heart Association’s annual meeting in Philadelphia.”

Macy’s (M)

Macy’s is down 39% on the year thanks to retail industry struggles, and global trade pressures.  While CFO Paula Price said that consumer spending was healthy earlier this year, the company lowered its forecast because of global uncertainties and declines in the retail sector.  “The slow death of traditional retailers—particularly department stores—has certainly hit Macy’s, which have closed more than 100 stores and cut thousands of jobs as mall traffic falls and customers increasingly switch to online shopping,” as noted by Forbes.

U.S. markets have had one of the best years on record.

To date, the Dow Jones Industrials are up 25%.  The NASDAQ is up 38%. The S&P 500 rocketed higher by 31%.  

From here, we could see higher highs with trade tensions dialed down.

Going along for the ride, some of the top stocks of the year, included:

Advanced Micro Devices (AMD)

Since the year began, AMD is up 160% and could push even higher on multiple catalysts.

For one, analysts over at RBC just raised their target price to $53 “as data center demand ramps up and gaming sales come in better than feared, as we expect, this should lead to higher gross margins relative to current Street expectations,” as quoted by The Street.

Two, over the next six months, the company has plans to launch more 7-nm products that are expected to give a significant boost to the firm’s bottom line. Three, new gaming consoles from Microsoft and Sony Corporation are set for a late 2020 launch, and will both use AMD chips.  It also doesn’t hurt that AMD continues to gain market share from Intel. 

Lam Research Corporation (LCRX)

LCRX had an amazing year to date, running 126% higher.  Analysts appear bullish, too. In fact, according to Kiplinger, “KeyBanc’s Weston Twigg is among nine analysts who have given Lam Research’s shares a Buy rating over the past three months. He cites a ‘compelling’ setup ahead of 2020, which should be a strong year for fab-equipment demand.”

KLA Corporation (KLAC)

Shares of KLAC are up 109% for the year, and could also push higher in 2020.  One of the biggest catalysts for stocks like KLAC is the 5G boom.  

As KeyBanc Capital Markets noted earlier this year, “We see selective investment opportunities in 5G infrastructure, M&A, and in semiconductor equipment, where we see favorable risk/reward given attractive valuations,” as quoted by Barron’s.

Earlier this year, JP Morgan also noted KLAC “has exposure to some of the hottest future technology trends, such as 5G smartphones, 5G infrastructure equipment, autonomous driving sensors, and cloud-computing hardware,” as also noted by Barron’s.

Cyberattacks in 2019 only grew worse.  

More than 540 million Facebook accounts were found exposed earlier this year.  Toyota revealed a data breach in April that may have exposed client data. Capital One disclosed a data breach that impacted 100 million in the U.S, and another six million in Canada.  

Banks in Bangladesh, India, Sri Lanka, and Kyrgyzstan were hit, allowing hackers to steal millions of dollars.  Three dating applications, Grindr, Romeo, and Recon, were also found to contain security flaws that led to the exposure of a user’s location, as reported by ZDnet. 

Up to five million DoorDash customers were part of a data leak in September 2019.  In fact, the driver’s license numbers of nearly 100,000 “Dashers’ were also accessed. 

A cyberattack just forced RavnAir to cancel flights in Alaska over the weekend after a “malicious cyberattack” on its computer network.   

CBS just reported that over 267 million Facebook users just had their personal information exposed in a massive data breach.  “Security researcher Bob Diachenko reportedly made the disturbing find on Dec. 14. Diachenko and U.K. technology research firm Comparitech believe the unprotected database was left open on the dark web for nearly two weeks,” they reported.

The worst part – we’re not prepared for the next one, nor do we know where it could happen.

It simply highlights the need for better cyber protection.  

At the same time, it’s creating big opportunities in related ETFs including:

Pure Funds ISE Cyber Security ETF (HACK)

The Pure Funds Security ETF (HACK) rocketed from a 2016 low of $19 to nearly $42 this year.  The ETF has holdings in Fortinet Inc., Check Point Software, CyberArk Software, Imperva Inc. FireEye, Proofpoint and dozens more.

First Trust NASDAQ Cybersecurity ETF (CIBR)

CIBR has been quite explosive, running from a 2017 low of $21 to a recent high of $30.  Some of CIBR’s top holdings include Splunk, Palo Alto Networks, Zscaler Inc., CyberArk Software, Symantec Corporation, and Fortinet Inc. 

Boeing (BA) is attempting to woo back investors.

Shares are up nearly $10 on the day after firing CEO Denis Muilenberg.

“The Board of Directors decided that a change in leadership was necessary to restore confidence in the Company moving forward as it works to repair relationships with regulators, customers, and all other stakeholders,” as quoted by MarketWatch.

Chairman David Calhoun will become the new CEO effective January 13, 2020.

The full press release from Boeing can be found here.

Boeing Attempting to Rebuild Trust

Just weeks ago, the stock came under pressure after revealing 2016 emails that called into question the safety of the 737 Max jet’s flight control system.  

The FAA said it found the messages to be “concerning” and “is reviewing this information to determine what action is appropriate.”  In addition, FAA Chief Steve Dickson told Boeing’s CEO, “I expect your explanation immediately regarding the content of this document and Boeing’s delay in disclosing the document to its safety regulator,” as quoted by NBC News. 

All after two fatal crashes in the Java Sea, and the Ethiopian plane downed in March.

Things got a bit worse for the company after FAA Administrator Stephen Dickson just there was no way the FAA would approve the plane to fly again this year.  

In fact, Dickson said, he could not provide a time frame for when the plane will get approval, adding there are 10 or 11 different steps in the certification process that are yet to be completed. “If you do the math, it’s going to extend into 2020,” as quoted by CNN.

At the moment, BA has caught triple bottom support dating back to August 2019.  If it can hold that level, we could see a potential bearish gap refill around $370.  However, it all depends on when and if the FAA approves Boeing’s planes to take flight again.

In short, it’s all up in the air at the moment.