Hey Folks, I Hope everyone is staying safe and not going quarantine crazy. The markets at times seems to have a mind of its own as we see many conflicting forces acting upon price action. Get my take on the markets below;
Sound Bites;
• Even though the Global Pandemic has claimed over 50,000 lives here in the US the S&P ended this past week only 16% below its all-time peak…many analysts are clearly puzzled and calling for more downside action given the dire straits of the US Economy with the prospects of future bankruptcies, dramatically reduced profit forecasts and soaring unemployment… thus far, over 26 million have filed for unemployment which still probably understates the extent of job losses which could give us in the month of April over 15% unemployment…and this is from a half century low of 3.5% just a few months ago…and against this backdrop we’ve seen Oil prices go to unheard of negative price levels as the May contracts dipped to over a -40 with no storage space available…
• Against this backdrop I would expect the FED Meeting and Policy Statement coming up this coming Wed will reflect more of the same; -that is, we will support the economy as needed…we can also expect interest rates to stay pinned near 0% and for the FEDs to maintain a heavy pace toward balance sheet expansion as they continue to support the credit markets…the near term outlook seems to be more of a deflationary tone but longer term we can expect inflation to come back to the forefront…as we see more supply chains moving back to the US combined with even more fiscal spending the ground work is being laid for a shift towards higher inflation longer term…keep in mind that over the past few decades Globalization has kept inflationary tendencies in check but on a go forward basis this will probably change…
• By the way, Europe is also a mess, and perhaps worse than the US…Germany is spending massively which is very uncharacteristic of their policies to support its own economy, and Italian Bond yields continue to rise as European officials continue to bicker over some sort of a coordinated fiscal package for its weaker members…in addition, Emerging Markets don’t look to promising as well with their currencies falling against the USD and few exports…
• Since the March 23rd lows the S&P is up 26.8% yet we are seeing the bulk of the strength of the S&P centered in a few big cap stocks; FB, MSFT, GOOGL, AAPL and AMZN…these stocks account for over 20% of the market as these companies are proving to be very resilient…we will see, however, once we move beyond the COVID-19 crisis, a large drop in the number of Corp Stock Buy-Backs…just over a half of the S&P companies and about 26% of the Russell 200 bought back stocks last year but early estimates indicate buy backs, which have been supportive of higher market price action will drop by over 20% going forward…
Enjoy This Weekly Round-Up;
Don’t Be A Rat Brain Trader – Be the Red Strip Zebra !!
Trade Smart !
hpb
