Hey everyone, as we round out the second quarter we are going into what is traditionally one of the worst performing months of the year for the S&P…get me take on the current market price action
WEEKLY SOUND BITES;
WKLY ROUND-UP thru Jun 26th 2020; Half Full or Half Empty?
• This past week we’ve seen optimism take a punch to the gut! The current re-opening progress of companies across the US are taking a hit with a rapid rise in COVID cases with newly reported cases hitting record highs…Throw in a more clouded view of the US Political landscape and there is reason for the increased worry and volatility we saw this past week. According to one market adage, the bigger the drop, the larger the pop as we’ve seen markets bounce up almost 40% off the March 23rd lows…but there is an equally prolific market adage that says now that the easy money has been made market pops can lead to market drops….so we have a cloudy view going out over the summer months with Q2 coming to an end and the month of July, which is traditionally one of the worst performing months coming up around the bend…
• Amid this market uncertainty we have seen investors pour money into the popular AMZN, AAPL, FB, MSFT and GOOGL where the market cap of these stocks represent almost 25% of the entire S&P valuation and over 40% of the NASDAQ Futures…so when these stocks stumble we will clearly feel it across all indexes…They will all still outperform, even in down markets but they are all susceptible to some profit taking…
• This past week the FEDs ran a stress test of the nation’s banks and found the top 33 banks could suffer over $700 Billion in loan losses in a worse-case scenario and the ordered them to suspend buybacks in Q3 and to cap their current dividends…the resulting stress tests caused financials to sell of as we rounded out this past trading week…
• Well, it has been about 100 days since the WHO declared the COVID-19 outbreak as a world Pandemic and with the markets up almost 40% off the March 23rd lows the next few months will be crucial as to how the year will finish…on one side we have the Bullish camp talking about the support of massive stimulus from Global Central Banks and the slow re-opening of country economies…and in the Bearish camp we see worries of over valuations and movement to fast off the lows as the number of COVID cases rise significantly…Key industry segments like travel and leisure and retail will see the biggest risk of a market set-back but also offer up the biggest potential upside should markets recover…
• Regarding market valuations according to Sector Watch, if we take the current yield on Investment grade Corp Bonds (3.57%) and the current 12 month forward EPS of the S&P ($127.21) that would put the current market value at close to 3563 a year from now….
Enjoy this week’s Weekly Round-Up:
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
