The Market Bottom Is Not Likely In
None of this is financial advice.
The stock market was a wild ride the last few weeks. It seems the roller coaster is not over.
Many are trying to call a bottom. At this point, I do not believe we are even close to that. There is a lot more pain ahead. For this reason, I am being cautious with the reenty into the markets.
Why do I feel this way?
To get to the bottom of all of this, we need to get painfully obvious. The market could care less about the virus and deaths. At the same time, it really gives a hoot about politics or the President's handling of the situation. The media likes to make that the case yet we saw a market running the entire time the President was being impeached. In other words, it shrugged it off.
So what does the market care about?
In truth, issues are only a concern in so far as it affects things economically. The market is about money, plain and simple. Thus, success is easier to achieve if we understand what it is about.
Therefore, when looking at the situation, the only thing is important is the economic impact. At this time, this is where more pain is found.
I can only imagine what Fortune 1000 CEOs and CFOs are going through right now. It is damn near impossible to unravel how things are going to pan out economically. The only thing we are for certain is things are negatively impacted. How much is anyone's guess.
And that is the problem. We are very early in the game that venturing a guess is apt to be way off. This creates a ton of uncertainty which investors hate. Money managers prefer those environments where there is a lot of stability with most of the variables being known. In an environment like this, all is off the table.
Uncertainly causes investors to pull back. That is why many are talking about the liquidity problem in the markets. Investors are taking their ball and going home. Cash suddenly becomes a viable option.
Of course, as a trader, this is a great environment. With so much volatility expected ahead, big moves each way are likely to continue. Being on the right side of these trades can be highly profitable.
Nevertheless, that is not a game for those with weak stomachs.
My intuition is the coronavirus story will run out of steam at some point in April as cases start to peak. This will likely drop the death rate to a level that is in line with other viruses we saw. That will kick off the next phase, the unveiling of how much economic damage was sustained.
We are likely to see negative growth in quarter 1. As things ramp up in the second quarter, supply chain issues might also pose a problem then. Thus, we could see a recession in the cards since the global economy wasn't exactly excelling before all this started.
Of course, yesterday's sell off was driven in part by the price war started by Russia with Saudi Arabia. That could be a situation which is prolonged, putting further pressure on markets especially as defaults rise in the E&P sector.
A lot of variables filled with great uncertainty.
At some point, though, we might see an enormous buying opportunity.
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Posted via Steemleo
