TWELVE o’clock TUESDAY – 3/24/2020 - Stock Market Report
Bearish … rating of 3 (0 - 4 is bearish, 5 is neutral, 6 - 10 is bullish).
The rating of 3, up from 2, is solely because we have already gone down so far, about -35% through last Friday.
Regarding today’s rally, I’m not certain what comes next, because a new element has been added to the mix, and that is a potential change in attitude in some circles. There is a shift to “get back to work early” that could be a real game changer for the economy (GDP, earnings, market prices). But is that the reason for today’s rally, or is it the likely probability that congress will pass economic stimulus legislation, to be passed sometime today or tomorrow (really a band-aid, not a permanent solution)?
Today’s market action, +1800 if it holds up, and yesterday’s loss, leaves us down 31% overall. But, many stocks are up more than 10% today, a few up 30%, i.e., ones heavily damaged by the virus, e.g., cruise lines). On March 13, the market rallied strongly (like today) before retreating again.
The rally today is news-based, and maybe brings a change in future economics. President Trump is leading a “fight-back” charge to “get back to work early”. He is concerned that otherwise “the cure will be worse than the problem”. The market likes this, but health officials may not feel the same way.
Meanwhile, the Fed is taking extraordinary action – buying securities that it has never bought before, thereby assuring investors that they are doing all they can to back-stop a “financial pandemic”. Congress could never come to the rescue this quickly, if at all. In the Fed’s role as lender of last resort, the Fed has gone “all in” to provide liquidity to US financial institutions, established companies and small businesses.
These are extraordinary times we are living in --- once again. Please, take time now to thank God we sold out of our entire position early in the 4th week of February. There is great distress among those who were not so prescient. Going into cash in periods of high risk is one way our strategy preserves your capital. We will shortly be able to buy great companies at great prices, but probably not until the coronavirus pandemic diminishes and/or is under control in some way.
I am still bearish, because we are still in the fight and have not won the war. When there is a slow-down, or some control, or a solution, fear will abate and people will go back to their offices and Wall Street will rise. Plainly, I believe this downtrend may last a while longer before turning the corner.
The purchasing power of our dollars have increased by approximately the same amount as the markets are down. If we buy stocks as the downtrend ends, we will have a chance to make real profits as the market and economy recovers. Compare this with other strategies that hold onto stocks as they go down, and as they go back up, with no real profits during the swings. Not a good result.
It’s sad that so many people die each year from the common flu virus – and now from coronavirus. Let’s pray for the nation and all its people, that the Lord will have Mercy upon us even though we are undeserving of such great love. And, let’s thank Him for our blessing.
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Opinions voiced in this post are for general information only and are not intended to provide specific advice or recommendations for any individual, without complete knowledge of that individual’s total financial profile. No strategy assures success or protects against loss.