Morning all.
US futures having been trying to pick themselves up since the gap down last night, and they’ve made pretty good progress.
Trump finally had to give up on his Easter reopening of the US yesterday as he extended the social distancing measures in place to the end of April.
It should be remembered that the measures in the 15 Days To Slow The Spread campaign are guidelines though and actual lock downs and business closures are in the control of state Governors.
So despite some acceptance by Trump that he can’t just keep pumping expectations and hoping it all goes away, only about half of the US states have actually taken the stringent kind of measures that we are seeing in Europe.
It should have been a dent to market sentiment that economic activity will be lower for longer but a lot of focus is being put on the quarterly rebalancing of funds that takes place around this time.
This saw a lot of talk of this last week and so I’m expecting that quite bit of this has already taken place to explain some of the rally that rolled out for most of the week.
But this could make the next couple of days messy as no one knows what fund flows need to move around between asset classes. I’ve also seen talk that some funds have suspended their rebalancing this quarter due to the high volatility levels of the VIX.
If there is unexpected strength in the markets then I’ll definitely be looking to secure more profits as I’m still convinced the US needs to take this more seriously than they are (at the national level) and that this realisation being forced on them at some point will lead to new buying opportunities.
I’m going to use some time this week to start researching UK House Builders as I think a very interesting opportunity is going to open up on them when this situation starts to recede. The housing market in the UK seem to be in a perpetual state of under supply and many of these companies have seen their stock prices cut in half (or more) over the last 5 weeks.
My big concern is the risk of solvency issues that could arise if the UK lock down continues for longer than imagined so I think it’s too early to buy any now, but having a good look at balance sheets and seeing what updates, forwards guidance, government support etc is worth doing to try and identify the best of ones to consider. I think these could make a good short-term trade if they can be jumped on at the right time.
Stay safe, thanks for your time.
$SPX500 $NSDQ100 $DJ30
