Towards the end of the trading day the US equity markets sold off with the DOW closing the day almost 500 points in the red. Meanwhile, the NASDAQ ended it's six-day winning streak. But why...you guess it COVID-19 chatter and the process of reopening the economy may be harder than we all imagine.
ING strategists think investors are way to optimistic about a 2020 recovery. Investor as pricing in a 20% fall in S&P 500 earnings before a 25% recovery next year. ING continue to state that a 20% decline in earnings is too optimistic based on their forecast for a 7% contraction in U.S. GDP vs. estimates of a 4% contraction. ING might be onto something.
New clusters of COVID-19 cases have emerged in countries that have begun to lift restrictions on business activity imposed to contain the spread of the disease, a development analysts said may be giving investors pause as U.S. states begin loosening lockdowns in a bid to reopen the economy.
In Wuhan, the Chinese city where the coronavirus first emerged late last year, six people tested positive over the weekend, ending a stretch of more than a month that had seen the Hubei province report zero infections, The Wall Street Journal reported.
Dr. Anthony Fauci, the U.S. government’s leading infectious diseases doctor, warned that the country faces “needless suffering and death” if the nation reopens too early during the coronavirus pandemic, as top health officials emphasized in Senate testimony on Tuesday the need to move with caution and expand testing.
Last week, Billionaire hedge fund manager Paul Tudor Jones told Bloomberg that he believes bitcoin will serve as a hedge against a jump in inflation he thinks is coming, due to central banks printing money and sharply expanding their balance sheets amid the coronavirus pandemic. This week Paul told CNBC that, "If a year from now, we are still in the same situation,’ dealing with coronavirus lockdowns ‘we would be called a second’ Great Depression."
Back in late March, the US Feds said they were going to buy corporate deb to alleviate any credit market freezes. Today they started buying exchange-traded funds that invest in corporate bonds. I bring this up because yes, the Markets pulled back today, but the pull back might be an opportunity to go long. Why go long...because until we see the 4 hr chart on the S&P 500 start making lower highs and lower highs, the technical bias has to be long.
For all you Bears out there like me, the good news is price action failed to make a higher high, so possible this might be a change in technicals, but we need to see some follow through.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.