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Is It Time To Buy The Dip??? - Part 36

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The 100 days since the stocks peaked on Feb. 19, then we had the fastest-ever bear market. Then we had one of the quickest, if not quickest corrections ever. The S&P 500 has regained 70% of what it lost during the bear market. It as also closed above the 3000 level, a whole, round and psychological level. And it has closed above the 200 day moving avg. The 200 day moving avg. has served as resistance for 4-6 weeks and now it severs as support…a bullish cash for prices to move higher.

With the S&P 500 already two-thirds of the way back from its bottom, that prospect -- that virus-fighting stimulus could linger for months or years after the worst of the pandemic has passed -- explains the uncanny confidence of stock bulls in the face of the worst economy since the Depression.

“The markets have become addicted to stimulus. That is the key factor that is going to continue to drive risk appetite, just like it did in the last cycle,” said David Spika, president of GuideStone Capital Management.

Crediting the Fed with boosting risk-assets is nothing new but its open-endedness may be the only way to explain a world in which 20 million Americans have lost their jobs and the S&P 500 is about four big days away from making up all the ground it lost since February. Many Wall Street strategists see the potential for the S&P 500 to go even higher than it was before the outbreak began.

Source

On Thurs of last week, the Markets sold off at the end of the trading day awaiting Trumps talk on Friday. Friday afternoon, Trump got all over China stating how they stole China US industrial secrets, how China was Beijing unlawfully claiming territory in the Pacific Ocean and blasted China for passing a national security law in Hong Kong. So it will be interesting move forward to see if the Markets can march higher or if we will get consolidation or if Trump’s speech marks the beginning of a reversal.

But according to Barry Bannister, chief institutional equity strategist at Stifel, sees the S&P 500 going to 3250 by September as on the second quarter being the trough in the economy. Barry admits he got caught off guard by the COVID-19 bear market, but said on March 19 that the stock-market could rebound back to 2,750 by April 30th.

However, according to Goldman Sachs strategist David Kostin, COVID-19 is behind us (speak for yourself David) and the bigger threat to the Markets going higher is the upcoming presidential election. David’s case is that when Trump one the election, Trump lowered the corporate tax rate from 35% to 21% allowing companies to keep more of their profits to buy back stocks, which caused the Markets to move higher. But if Democratic presidential candidate Joe Biden wins the upcoming election, he will rise corporate taxes to 27%. And according to David, increase in corporate taxes could equate to an 11% reduction in S&P 500 earnings.

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.

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