Good Morning America!
The next few weeks look to be exciting as the U.S. economy will be brought out of the recent induced coma. I do not believe I need to playback how and why we arrived here, as the 24 hour news coverage has not let much slip our consciousness.
Most of you know I am not a huge fan of the news services, they profit from selling fear. It is how they fund their operations - scare you, then run a commercial when your attention is at its highest (and it works). So, let's talk about a few facts they may not be discussing.
What an amazing time we are living in - the U.S. economy has shifted into idle to preserve the health of our older, at risk population (myself included, now that I am 60 years old). The biggest economy on the planet...Idle. The coordination of this monumental task has been virtually unbelievable and massive.
The necessary services including food, power, communications, technology and health care are still operating - what an undertaking! WE did it together along with the leaders in Washington. The stimulus around the globe has been unprecedented.
Now, let us look forward: The Markets.
Last night as I was contemplating the writing of this piece, I did what I have often done in my 36 year career...listen to what the market is telling us. That is more challenging than it sounds. Particularly now - it is especially challenging when something unprecedented occurs and this entire year has been unprecedented.
Please recall that late last year the economy was accelerating and healthy. Then the virus hit...
Listen to what is happening now:
- The Federal Reserve has lowered rates.
- The federal government has added stimulus.
- Energy prices are historically low.
- The recovery has begun.
A few weeks back, I said the market had to stop going down before it could rebound - it did. We experienced the fastest 30%+ decline in history. We are now experiencing the fastest recovery from a 30%+ decline in history. The market does not like uncertainty - it has adjusted to our current environment. I believe the panic yielded to the "relief rally" that I had discussed here and expected. What now?
The next 4-6 weeks look choppy to me. There are times we can be more assertive in the market and there are times to be more cautious. I believe the recovery of the market will continue but will be interrupted by some choppiness. I do not have a crystal ball but I do think the upside is becoming more limited. The risk/reward is not where it was a few weeks back. I think the downside is more balanced with the upside now. Upside for the S&P is at all-time highs at 3393 and the downside is 2550-2650 area. Please understand that things are quite fluid - the market will change rapidly.
Thank you for allowing us to share our perspective.
Enjoy the day...R2