Hey Folks, for those of you living in most States in the US remember to set your watches ahead 1 hour Saturday night…now if only the markets can fast forward thru this sudden shock to the financial system we may get a resolution much quicker. But of course it will not work that way and we will see a lot more chop and wild swings in the markets as analysts try to develop more accurate future revenue assumptions from global production shut downs…
Weekly Sound-Bits
• This is the kind of market where you would short sunshine and go long hurricanes….Fear continues to gripe the markets as we are in the 3rd week of the Covid-19 impact on US markets…with initial signs showing on Feb 20th, we’ve had periods of very large 1,000+ swings in the DOW and 100+ swings in the S&P…like trying to follow the path of a Squirrel crossing a 4-Lane Highway, it is very erratic…This past week for example, the DOW price action each day was +1,293.96; -785.91; +1,173.45; -969.58; -256.50…
• The productivity seems to be lifting a bit in China, yet we’re seeing the opposite effects in South Korea, Japan, Iran, and other countries across Europe like Italy…and here in the US we are seeing, as expected more reported cases…I’ve heard terms like “Exogenous Shock”, “Black Swan” and even “Royal Flush”….all seem appropriate as markets try to determine the downstream impact of revenue assumptions…most are being dramatically lowered as some industries, like travel and leisure are getting decimated…I believe it could get much worse before improving, but the unknowable at this time is how much of a revenue impact will actually occur…
• And unlike the 2008 great financial crisis, this is more about a supply shock to the global economic system…this can move to a demand destruction feedback loop…If factories cannot produce, they cannot deliver goods to companies wishing to resell to their end customer; consumers are less willing to travel and spend thus impacting my different economic segments of the economy…currently the markets are wrestling with future downgrades from the Covid-19 impact…and even though this is viewed through the lens as a transitory event, the future impact on Corporate earnings is very difficult to determine at this time…
• The US Economy will fare much better than other countries as a result of this sudden global shock, since the economic foundation is much stronger…the Jobs Data that came out this past Friday showed a very strong US Consumer and economy; wage growth higher, employment down to 3.5% and much higher than expected new jobs added (273,000)…however, due to the ultra-low interest rates and tons of Fed Stimulus we’ve seen asset prices elevated higher than normal given the current corp. profit levels suggest…Corporate profits have not increased very much over the past 5 consecutive years (last year they actually fell) yet we’ve seen the S&P move over 60% to the upside….this is what very low interest rates will do for you…
• Even the unexpected, between Fed Meeting, 50 bps drop in interest rates did not do much in the way of stopping price action from moving lower…and of course lower interest rates at this point may not be as effective as more fiscal stimulus action from the US Government…I suspect we will see this coming up shortly…
Enjoy this week’s Weekly Round-Up;
Don’t Be a Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
