Wed saw a strong rally around the world on news that the FDA is about to approve a drug that can help treat the coronavirus. The week so far also saw some 200 of the top companies reporting Q1 figures that beat or matched expectations. On the surface, it was all good news, however, one needs to put things in perspective... Q1 encompasses 2 boom months of the 3, and a treatment for the coronavirus is not a vaccine nor a cure, it does little to speed the reopening of the economy. Putting all this together and taking on board comments and projections made by the companies that reported, and taking an optimistic 20 multiple on estimated earnings, puts the S&P500 at 2,600, some 12% below current prices.
Looks like 3 days into Germany relaxing the shutdown, infections are starting to rise, much the same as happened in Singapore. Rather bad news for the countries/US states that were ready to relax restrictions. Each week economies are shut increases the damage, each month more of that damage becomes irreversible and lost jobs irrecoverable making recovery more difficult on a logarithmic scale... not a good situation at all, yet markets continue to make new post-23rd highs. In the 10+ years I have been watching market behaviour I have never come across rising markets in the face of uncertainty, sometimes bad news has the opposite effect, but never has uncertainty cause rallies. We are in strange times.
FX I agree with you 100% but it appears there are far smarter people than you and I controlling the levers! From a TA perspective we are still moving up but for how much longer I have no clue. I will let you know when I see something. We have had a couple of sell down on the way up but nothing that convinced me we were rolling over.
Well, I'm positioned for at least a 12% sell-off and sticking to that strategy, we'll see how dumb that is by mid-way through Q2. I'm also betting on the AU fairing better than the USD & Euro within the same time frame. Here's a CNCB Headline that will stay with me: "After a crush of corporate earnings and jobless claims that topped 30 million, the Dow Jones Industrial Average surged 532 points, or 2.2%"
I see red everywhere on NY Open (One green shoot - Amazon), perhaps the EU GDP figures showing the EU has contracted to levels not seen since 1949 and the IMF's prediction of 50% world unemployment are sending a signal that not all is as good as the optimists thought.
Congratulations @federalreserve. Market cap to GDP is back up into bubble territory at a whopping 138%. https://t.co/lIZODm5iCF
US Futures gapped down 1% on Friday, adding to Thursday's -2% at the close. Perhaps the EU shock economic figures & the 30m unemployed in the US have driven the point that although the word had gotten better at managing the virus and so driven the infection curve down, it's not time to celebrate as the reality is that the economy has taken a hit, the world is in recession now, we don't need to wait for the "official" 2 quarters of contraction to know we are in recession everywhere. DOW is now almost 1,000pts down from April high.
People in the know, such as Jim Chanos has determined that a large part of the market surges of Dec to Feb were created by retail investors returning to the market after having stayed away since the Dec18 sell-off. Jim Chanos describes it as "it was like a switch being turned on" an avalanche of mum & pop investors came is all at once. Another instance of this group been left holding the bag... buying high and possibly forced to sell low.
Buffet still on the sidelines. Sold off all airline stakes, at a loss. One reason was the recovery was faster than expected due to the Fed intervention. Some of technical analysts/ chartists are calling the top is in, and to get ready for the next leg down. Plenty of predictions out there stating we are in for more carnage . When comparing the charts from prior crashes, it does get one thinking there are new lows to be made. I've got family members asking what they should do with their super. Most economical measures point to more pain, but with the stimulus and urge to recover with pace 'could this time really be different'. Even in GFC stimulus could not prevent a sustained bear market. Is the bottom in, or are we in for 12-24 months of new lows? I have no idea, and can't advise them one way or the other regarding their super allocations.
I just had a flick through the daily charts and upward momentum is starting to drop. This week will let us know. If we start making new lows a rollover is on the cards but we have had a couple before that did not turn into anything. We shall see what happens this week. Super : if you are retiring today, there might be a slight problem. If you are retiring in 10+ years, I would not worry about. If you have a self managed super there could be some buying opportunities for a long term hold.