Morning all.
It looks like markets are going to start the month on the back-foot as finally, Trump’s propaganda machine finally collapsing under the stark reality that the US is heading towards a crisis.
It’s been quite incredible to see the media and his medical experts continue to let him hoodwink the US people and the entire world recently, despite all the data being out there, and his statements like one day it [the virus] would just magically disappear were absurd but unchallenged.
I don’t want to focus on this though, it’s been clear to see and I’ve written about it plenty.
Something we did get last night though was one of the market heavyweights coming out and calling for a new low in the markets.
Jeff Gundlach of DoubleLine Capital stated:
““The low we hit in the middle of March … I would bet that low will get taken out,” Gundlach said in an investor webcast on Tuesday. “The market has really made it back to a resistance zone and the market continues to act somewhat dysfunctionally in my opinion. … Take out the low of March and then we’ll get a more enduring low.”
There has been very few willing to make this call, which stands in direct opposition to that from Lee Cooperman, the founder of Omega Advisors, who said he thought the bottom was in.
“ If I’m right on the virus call, if I’m right and that’s the big ‘if’ … I think the market at the recent low … was close enough to the bottom to be called the bottom,” Cooperman said on “Squawk Box.”
Other big names like Howard Marks suggests that markets are at a level where investors should be starting to buy in an interview this week:
“ I never believe that I know when’s the bottom, but I know things have gotten a lot cheaper and it’s reasonable to do some buying. If it goes lower, do more buying,” Marks told CNBC’s Tanvir Gill. “There’s no argument for spending all your money now, but there’s also no argument for not spending any of your money now. I would do something moderate, in between.”
There’s a similar split picture amongst the investment banks with the likes of Goldman Sachs calling for something closer to 2,000 on the SP500 before a recovery back to the 3,000 level, whereas Morgan Stanley have already turned quite bullish with the Head of Wealth Management stating “We like these prices a lot….We’ve been scaling back into stocks over the last two, three or four weeks.”
Most investment banks still have target of over 3,000 on the SP500 reflecting the widely shared sentiment that a recovery will take place this year regardless of where they think they ultimate low is.
The markets would easily have been lower if it was not for the FED’s unlimited QE and the government’s $2 Trillion stimulus package, and this is always the danger of expecting new lows.
Now Trump is touting the idea of a new $2 Trillion infrastructure investment package and measures like this can and do change market dynamics.
So while I expect markets to head somewhat lower, I’m not convinced new lows can be made now that bailout packages exist for some industries that were part of pulling markets to the current lows, combined with the chance another stimulus gets announced.
I think markets will be volatile as they start revising expectations and I’m also wondering whether some panic could come back if there is bit of a scramble to exit the market before the weekend.
Be prepared for more volatility and be thankful if data trends better than feared.
Stay safe, thanks for your time.
$SPX500 $DJ30 $NSDQ100
