🎤😨 Did the Presidential debate just spook the markets?

What’s on the Menu 🍴

Last week we saw one of the lowest rated Presidential debates in history…

And it seems to be spooking the markets!

Today we’re taking a look at what’s poppin’ this week, and what to watch out for.

• What to Watch This Week 👀

• A Historic Decline for Drugstore Stocks 📉

• ”Embarrassed” To Own Bitcoin? Don’t Be. ₿

Today’s newsletter is a 5 minute read.

What to Watch This Week 👀

The second quarter of the year just wrapped up, and while it’s a slow time for financial markets, the back half of the year should bring plenty of fireworks.

Politics is beginning to take center stage, with the first US presidential debate last week and elections in France and the UK this week.

Elections are affecting stocks and crypto as investors forecast winners and losers based on who leads in the polls.

July tends to be a good month for stock returns at least:

This week there’s a market holiday in the US (Wed/Thurs) and a very light earnings calendar, but plenty of macro data will be released:

• Japan consumer confidence (Mon)

• Germany inflation (Mon)

• US ISM Manufacturing PMI (Mon)

• EU inflation (Tues)

• US JOLTs Job Openings (Tues)

• Canada trade balance (Wed)

• US ISM Services PMI (Wed)

• US FOMC minutes release (Wed)

• Australia trade balance (Wed)

• UK elections (Thurs)

• Canada unemployment (Fri)

• US unemployment report (Fri)

The jobs data in the US will be in focus especially after the big earnings misses from Nike and Walgreens last week.

Tesla will report Q2 deliveries this week and we’ll also keep an eye out for any other Q2 pre-announcements.

Famous meme stock investor Roaring Kitty (aka Keith Gill) got traders excited about pet related stocks last week with this picture tweet:

So we’ll be keeping an eye on stocks such as CHWY, BARK, and WOOF…

We’ll also be keeping an eye on the following assets & sectors this week:

📈 Rising Recently:

• Software (IGV)

• Energy (XLE / XOP)

• Regional Banks (KRE)

• Momentum (MTUM)

📉 Falling Recently:

• Cleantech & Solar (TAN / PBW)

• Chinese stocks (KWEB / FXI)

• Homebuilders (XHB)

• Small Caps (IWM / IJR)

A Historic Decline for Drugstore Stocks 📉

Last Thursday US drugstore chain Walgreens (ticker: WBA) saw its stock plummet by a whopping 22%:

It was the largest one day decline for WBA in over three decades, and the stock is now down 70% over the past five years.

The chain reported disappointing earnings, took down annual earnings guidance, and said it would close up to 25% of its store base over the next few years.

Walgreens isn’t the only laggard in the industry either…

Rival CVS (ticker: CVS) has also seen its stock decline by 25% year-to-date.

Both stocks are now trading at historically low valuation multiples:

Despite the low valuations however, many investors are avoiding both stocks because of declining financial performance in recent years.

Both CVS & Walgreens are experiencing steep declines in earnings this past year, even though revenues have actually grown.

Both firms are dealing with higher theft, higher operating costs, and issues with past acquisitions.

CVS & Walgreens both pushed deeper into health care clinics and insurance in recent years, but the added complexity has been a major headwind.

The question now is whether these firms can turn things around and get back to growth, or if they’ll end up in bankruptcy like competitor Rite Aid.

The level of debt on the balance sheet at both CVS and WBA is somewhat high, and the dividends they pay could be at risk of getting cut if performance doesn’t improve.

That’s especially true at Walgreens, which had negative cash flow over the past year.

Both firms could really benefit from a halt on new acquisitions (CVS paid $10 Billion last year for Oak Street Health) and a focus on improving profits.

We’d even go so far as to say that both firms could benefit from activist investors on the Board or even management changes given the poor performance in recent years.

Until Walgreens and CVS show that they’ve really begun to address their core issues with urgency, the stocks will likely remain out of favor.

”Embarrassed” To Own Bitcoin? Don’t Be. ₿

As a financial planner, I talk to a lot of people about their financial lives.

I was having a conversation with a prospect who was giving me the rundown of their money situation.

He continued to explain he has a paid off house, a large percentage of wealth in passive index funds.

He continued on “I’m embarrassed to say, but, I own $300,000 of Bitcoin. I invested early.”

It struck me that he felt he had to explain that he was “embarrassed” to own Bitcoin.

I know where it stems from: many financial advisors have been quick to dismiss cryptocurrencies like Bitcoin as gambling, reckless investing, or a waste of time.

The financial professional community hasn’t been kind of clients interested in this fresh asset. Advisors are not afraid to speak their mind and it’s causing clients to feel like they’re doing something “wrong.”

I find this to be problematic.

I quickly responded with “please, don’t be embarrassed, this is why a lot of people like to work with me. I understand Bitcoin and it’s nothing to be ashamed of.”

You see, there is a right way and a wrong way to manage the risk of Bitcoin and other cryptocurrencies. No one can deny that risks do in fact exist.

They exist with ANY asset.

The best way to control the risk is through position sizing. Which this person wasn’t overly concentrated in Bitcoin in relation to his overall wealth at all. He was actually doing great in that category. Even more reason he shouldn’t have felt embarrassed.

We talk a lot about the risk of investing in Bitcoin, but, what about the risk of NOT investing?

Now that we have more data on Bitcoin’s returns, this can be more of a serious conversation that advisors (who get it) can have with clients.

Bitcoin since 2016 has had a compounded annual growth rate of roughly 80%. For reference, the S&P 500 has annualized returns of around 10.5%.

Bitcoin has built a lot of wealth for individuals and families (this gentleman included), and I am afraid people will not seek out financial advice when they need to manage that new wealth the best way possible.

The truth is, if you’re an early Bitcoin investor, you should be proud. This cohort caught one of the biggest trends next to AI in our generation…and many of them are still holding that precious wealth.

You should feel comfortable going to a professional without shame.

Food For Thought 🧠

"The stock market is filled with individuals who know the price of everything,
but the value of nothing."
- Phillip Fisher

DISCLAIMER: We are not investment advisors, and this content is for educational purposes only. We don’t offer financial, legal, or tax advice. Nothing we say is a recommendation to buy or sell any assets. Trading and investing are extremely risky, so please be careful and do your own research.