The Big Q: What is going on in this Stock Market?
The Big A: A confluence of confusion aka lots of unknowns.
I have been in the stock market since Y 1981, and like everyone else I know in this game, have not see this kind of action ever.
What we have seen since the February highs is investors and traders alike wondering Very Bearish or Very Bullish?
Thursday we were confirmed in Bear market territory, at the close Friday that confirmation is questionable.
There are a number of factors affecting investor psychology, which include the yield curve inversion, debt, BREXIT, the unrest in Hong Kong and Paris, the US-China trade deal, Iran on nuclear weapons, the run on toilet paper, this new Virus recently dubbed a pandemic by the UN’s WHO and the fear of recession in an election year.
All of this seemingly coming to a head on 19 February when the S&P 500 market it’s all time highs at 3,397.80, it closed Friday at 2,711.03 up nearly 2,000 pts and on the brink of Bear territory.
DJIA +1985.00 at 23185.62, NAS Comp +672.43 at 7874.23, S&P 500 +230.31 at 2711.02
- NAS Comp -12.2% YTD
- S&P 500 -16.1% YTD
- DJIA -18.8% YTD
- Russell 2000 -27.5% YTD
The degree to which investors have piled into the safe-haven of government debt has driven yields across the globe into ultra-low and negative levels, a dynamic that has also helped to keep US government bond yields pinned lower.
There are now trillions in government debt carries a yield of less than 0%, another unusual condition in markets that has helped to drive investors into risky assets including stocks for lack of better-yielding assets.
There are lots of unknowns
The reversal in the stock market has been stunning in its speed and scope.
The Key factor for this reversal has been stunning, since it was not in any analyst’s forecast that I know at the beginning of this year.
Then came COVID-19 and in the mind of the WHO, COVID-19 turned into a global pandemic.
In the mind of the market’s it is happening that has shut down major economies, softened consumer and business confidence, and perhap halted the longest Bull market in history.
The Bull market was running strong 18 trading sessions ago, then it turned on a dime. Since marking its all time high the S&P 500 fell as much as 27%, today it came back strong on President Trump’s policy, Fed stimulus, good market buys and a continuing strong economy.
As I see the major index charts technically, sans the Russell 2000, and the VIX, a bottom is in or about in.
And from what research I have done there is something very different about the coronavirus Vs the flu, it is not biological it is political.
This market is for machines, seasoned professionals and Not for civilians, stay on the sidelines and stay the course, as the confusion will end.
Have a terrific weekend