I normally write this weekly commentary on Friday afternoon. But this time around I had to wait til Sunday evening to see the stock futures. And to witness if investors were finally willing to admit that the rally up to 3,200 was always a case of “irrational exuberance”…
Right now market futures are pushing just below 3,000 which is kind of an important psychological area of support for stocks. The last couple times we got to this juncture stocks bounced back with gusto.
Interestingly a couple weeks ago the looming break down below 3,000 was thwarted by a “Hail Mary” from the Fed and Trump administration. First, the Fed announced the coming purchases of individual corporate bonds. Then later that same day the Trump administration trotted out plans to for $1 trillion in fresh infrastructure spending. Next thing you know the market rallied 5%.
Day by day since then the air has been coming out of the tires. And here we are again ending the week precariously balanced on this important level of 3,000.
This sets things up for a very interesting week where stocks either succumb to the depressing realities of the economic situation. Or we continue building this house of cards awaiting the collapse at some later date.
I know that with Coronavirus cases up 50% coupled with the worst economy in our lifetime that stocks SHOULD tumble below 3,000. I sense that once that actually occurs, then the FOMO will kick in to the downside and we could easily see stock prices tumble another 10-20% lower in short order.
On the other hand, I could just as well see stocks spike again extending the trading range scenario I spoke about in this recent article: Bear Case + Bull Case = Trading Range? Especially true if the Fed has another well timed trick up their sleeve.
So yes, it could truly go either way at this stage. However, my economics degree + 40 years of investing tell me that we should still be mired in a nasty bear market. And that the bounce from bottom was starting to take on bubble proportions.
It has always just been a matter of time before the price of stocks better matches up with the still raging virus that will continue to hamper the economy and corporate earnings for months and, likely, years to come.
This is why I am confidently loaded up in a hedged portfolio for the Reitmeister Total Return newsletter that is built to…
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