Someday, maybe many years from now, there may be a lesson finally learned that “shooting first and asking questions later” is a foolish pathway for investing. Yes, sometimes markets and the investing process just gut you. Sometimes those periods can last for a bit.
The good news? They end…and then historically, dare I suggest we be positive – they rocket back for years to come. Why? All major setbacks cause one major shift: we shed the old and build, configure, create and live -the new normal.
As much as everyone thinks “the new normal” is some sort of new phrase or thought – it has been around forever. Indeed, it has happened often – after every shock – so don’t fret. Know this: as tough as it will be to consider – in my opinion, we should know this: the future – post-Covid (PC) – is set to be even better than the past.
Yes – there will be some rocky periods we have to digest – but we sort of see this like Buffett has so far: stay quiet, let the extreme record levels of panic work through the system – and then as the fog clear, perceptions always change. It’s kinda like Chicago weather – if you don’t like it right now – wait for a few minutes.
The trade range beginning to form will provide ample long-term opportunity and rebalancing benefits.
I have a few charts below where you can begin to see where the panics are settling out. Yes, there will be some losses taken in a few areas for better opportunities ahead – but be sure of this. The tax value of losses will increase as well as we will surely see tax increases sooner than we think to begin to pay down the cost of this event.
The toughest part -waiting for it.
The chatter about a U or a V or a W or now – even a Nike Swoosh – as ways to define the recovery should be viewed in only one manner: chatter. Some smart people indeed – but no more than guesses, couched as expertise – while being used to fill time with, well, noise.
Sounds crappy – sure – but in the end, just calling it what it is – and isn’t.
By the way – we did a couple fresh videos to help on step outside of the constant negative chatter. You will find them valuable – we will have them out to you in tomorrow’s morning note for your weekend viewing.
The bottom line: COVID has not changed the underlying current. The Barbell Economy© is here for the next 35-40 years….get your surfboard and start paddling out in the storm….and be prepared.
How is Sentiment?
“In the tank” would be a good thought on that front. And as much as this is going to be frustrating to hear – I can’t tell you how good that is for the long haul. After 38 (this coming August) years of doing this, I can assure you it feels like I am watching a replay I have seen before – like 10 times.
Yes, there is tough work ahead, very tough work – and for an extended period of time.
But that is ok. Why?
√ Because America does tough really well…and far better than the chatter on the airwaves would suggest to a listener.
√ In fact, we collectively, like it or not – even as we kick and scream the entire time – do tough, build tough,conquer tough better than any other developed economy in the world – bar none.
Back to sentiment…EXCELLENT NEWS: AAII is now showing 2 bears for every bull!
The Bullish read itself is now just 4 ticks away from the lows we reached in March of 2009 – some 17,000 DOW points ago.
…read ’em and reap….
In a nutshell – for every person who thinks good about the future, 3 think poorly.
It matches well with the stats we saw from BAML from the past couple of emails.
Net net – sentiment is precisely where you want it for long-term horizons ahead. That does not mean it all changes overnight. It does mean that history proves to us that every bear market or shock, creates the foundation for the next significant bull market.
Here are a few charts and some notes to consider. The three major averages are beginning to create a little congestion now that we have seen some semblance of steadiness. This provides some framework to work from and plan around…S&P 500 first, the NAS second and last is the DOW:
Notice that the S&P and DOW are sitting below the trade range from most of the previous 24 months. The Nasdaq on the other hand – is slightly above that range. The purple lines are there to try to define the earliest stages of what could the current trade range where we are likely to trade for a bit as we work through the restart. Don’t forget the “sell in May” crowd still to come.
They have seen the “come to Jesus rally” as more of a way to get back some of what they lost.
When they do sell – many will never be back – just as we saw in 2008-2009.
My hunch? The market may tire a bit here near-term as a flood of earnings will hit next week and the week after. Don’t fret as I suspect we get some nice little spots for opportunity between now and the end of May. What may be a surprise this year? The summer swoon pattern may change.
Last but not least – remember the two words that change everything: “successful treatment.” Remdesivir data will be out in the next week or so.
Even so, we are adding more science, more technology and more brainpower to the fight – looking for a vaccine and a treatment – every single hour.
The longer that clock ticks, the closer the bell comes to ringing.
Until then, pray for some chop and red ink – bouts of red ink are your friend now as we steadilyuse cash levels to build on setbacks to support.
Stay Safe and Healthy
Please remember – we are here to help as always.
Try very hard to reduce your stress – as we all work through this together.
Together is how our ancestors built this country.
Together is how we will conquer this enemy and carry us all into the New Age ahead.
It is set to be VASTLY more positive than we currently perceive – as always.