Treating severe cases of COVID-19 has been a challenge for healthcare workers.
The approach has been to ease symptoms and prevent secondary infections. Physicians are using a combination of hydroxychloroquine and zithromycin, but this has led to mixed results.
But the drug that health care experts project to be the most promising treatment is Gilead Science’s Remdesivir.
Initial results from a hospital in Chicago are showing rapid recoveries in fever and respiratory symptoms. As a result, the hospital discharged nearly all patients in less than a week.
The full study could prove a turning point in the global coronavirus saga and that would be some welcome news after several long months.
Markets are reacting positively to the news, with the Dow Jones Industrial Index up 500 points and the S&P 500 up 2%.
And Gilead Science’s stock is unsurprisingly amongst the day’s market leaders at +8%.
But today’s risk-on rally is providing some opportunity in safe-haven assets.
In particular, the demand for US dollars has generally turned the market around in recent weeks.
When oil prices collapsed in March, investors moved into dollars.
When stock prices followed oil lower, investors moved into dollars.
And when corporations drew down their revolvers to outlast the shutdown, they were moving into dollars.
In fact, since the March 9th oil price collapse, the US Dollar Index and the S&P 500 have been mirror images of one another.
This trend is telling us to get back to basics and be contrarians.
When the market plummets, take the opportunity to wade into underperforming assets.
And when the market rallies, take some profits…so we’re going to do just that.
The charts below show those positions are up 19% and 16% at the time of this writing. So, let’s go ahead and sell half of each position now, and we’ll roll this profit into our next investment.
So, with the market up and the dollar down, we need to figure out the best opportunity amongst the underperformers.
We’re still looking for an opportunity to short the Euro, and we have some capital to deploy into our emerging markets short. But unfortunately, those two ETF’s (EUO and EDZ) aren’t yet at very attractive levels.
But gold has sold off a little today, with futures falling below recent support at the $1,700/troy ounce level. And that sets us up with an opportunity to pick up some leverage to the yellow metal at a decent price.
A word of caution, though…
I’m still not optimistic the market will hold current levels, and we know that gold doesn’t perform well in a liquidity event.
As such, let’s tread lightly for now, and only deploy ¼ of any intended stake. Also, set a limit order to pick up another ¼ stake at $161.42 per share, and await instructions on the remainder.
That’s it for now. We’ll take the weekend to survey any further developments in global markets and look to expand our footprint on Tuesday or Wednesday.
All the best,