We've Already Recovered Halfway!

[SeattleRocks]

I'm surprised it turned around that fast. I was half-expecting a recession that would last for years. Instead, it seems like we may pull out of this in a few months.

We haven't seen companies earnings yet, nor the full impact of unemployment. Defaults, bankruptcies, housing market are all still to come. We will have to wait and see if the Fed's stimulus and backstops are enough.

I think we are in early innings of this thing and while the run up has been nice, I personally believe it is temporary. Q2 is going to tell us quite a lot and I believe its a good possibility to get back below 20,000 and possibly even retest the 18,500 low.

Here is the issue - its a Catch 22. If we jumpstart the economy too soon, we are going to see a nasty and deadly virus impact but if we don't all start getting back to work the economy is going to fall apart. Really difficult decision the President has to make.

 

[Freedom56]

The action by the Federal reserve with respect to the announcement of corporate bond buying through Blackrock, have stabilized the bond market from indiscriminant selling into an illiquid market and has also stabilized the equity markets for now. I'm not complaining about the move as I have benefited tremendously from that announcement as I hold individual corporate bonds and CDs. However, despite the massive gains of 60-200% of stocks since mid-march that were down 50-98% from their all time highs, the corporate bond markets are beginning to look ahead and those companies that were showing stress before are now discounting bankruptcy and are attempting to price the value of the unsecured debt after bankruptcy. Dividend cuts or suspensions are coming for a lot of companies as bond holders will pressure companies to do so. Equities trade based on emotion sentiment and supply and demand. Bond trade base on risk of default. The yields are still at extremes for many companies signalling high rates of defaults ahead.

 

[ER Eddie]

We haven't seen companies earnings yet, nor the full impact of unemployment. Defaults, bankruptcies, housing market are all still to come. We will have to wait and see if the Fed's stimulus and backstops are enough.

I think we are in early innings of this thing and while the run up has been nice, I personally believe it is temporary. Q2 is going to tell us quite a lot and I believe its a good possibility to get back below 20,000 and possibly even retest the 18,500 low.

Yes, it's true that it's not over yet, not by a long shot, and anything could happen, including a recession that lasts for years. I'm no soothsayer, so I have no idea how it'll play out.

I'm encouraged by the good news, though. Things are not nearly as dire as the models were predicting.

 

[target2019]

Models are not always straight line projections. So we're probably in the range of most models.

 

[audreyh1]

Yes, it's true that it's not over yet, not by a long shot, and anything could happen, including a recession that lasts for years. I'm no soothsayer, so I have no idea how it'll play out.

I'm encouraged by the good news, though. Things are not nearly as dire as the models were predicting.

You don’t know that yet! It’s too early.

 

[Redbugdave]

We may also have a second wave of this virus later in the year as well. That will affect our recovery and slow down the economy. Trillions of dollars are hinged on getting a good vaccine out...but that is a year or more away. I think we are just getting over the first hump and another hump is ahead of us. My gut feeling is the markets will be stalled for the year. Market timers and the computer programs will cause the market to gyrate for several months. It will be a year.

 

[Montecfo]

Sure seems it’s a premature rally. More businesses doing full layoffs, bankruptcies starting. Assume distancing extends through August. Q1 then Q2 and Q3 earnings all impacted severely. I’m expecting more dips. March lows might be bottom.

In my opinion the market is writing off 2020 and focusing on 2021.

I am sure it will be a bumpy ride, always is.

And it seems like so many folks expected a re-test that no retest became the base case.

My expectation is we take out the lows later this summer, which will be very painful for folks who endured the selloff but will kick themselves for not selling the rally.

My plan? Stay the course. Buy the selloff.

 

[Shredder]

I think the virus is in charge for now. Any new information on that front will make for market volatility (up and down) until we have a handle on the virus.

And once the medical news gets better, how will the govt handle the recovery? Plenty of room for missteps here I think in an election year.

 

[W2R]

I agree with what most of you are saying on this thread.

In fact, I changed my sig line, in part due to this thread, because my thinking regarding this market dip as well as the virus is that "It ain't over till it's over".

 

[Badger]

Some folks keep talking about "Herd Immunity". How well has this worked for Ebola Virus, HIV, Rabies, Marburg virus, Small Pox, Influenza, Hanta Virus, Dengue, SARS CoV, Rotavirus, SARS CoV2, or Mers? I have not heard that "herd immunity" works for these. The only control for some of these is a vaccine. Does anyone have documented proof that "herd immunity" is responsible for the control of any of these deadly viruses.
Until there is a control mechanism of some kind for Covid-19 that includes accurate and fast detection with effective vaccines I don't see there being anything but a relapse in the medical arena with a corresponding relapse in the financial arena. And we have yet to hear much from countries in the southern hemisphere except for Australia.



Cheers!

 

[ER Eddie]

You don’t know that yet! It’s too early.

Well, the original models said we were going to have 100-240K dead. Now, based on data about what's actually happening, it's looking more like 60K (I'm speaking of the US). Not to mention the drastic, widespread bed and ventilator shortages which were projected, but which aren't happening. Surely, that's good news and a sign that things are going in the right direction. (I know, don't call you Shirley.)

I didn't say everything will work out fine in the end. I said I'm no soothsayer and have no idea how it'll play out in the long run. Maybe everything will go to hell next Thursday. Maybe the virus will recur on a yearly basis for the next decade. Maybe it'll develop another mutant strain that dodges our attempts to squash it. Maybe it'll wipe out all human life on the planet. Maybe the monkeys will take over. Maybe that will be an improvement. Who knows.

What I'm saying is that, so far -- at this point (which is early, granted) -- we are doing better than a lot of people expected and feared. That's good news. That's what the markets were reacting to, after all (part of it, anyhow) and I assume part of why they're planning to begin reopening the economy in a few weeks.

 

[JoelT1]

I saw an article comparing this crash to 2008. It suggested that we are in for another crash in the next couple of months.

2008 was a housing bubble/bank issue.

This crash was totally caused by the COVID. The COVID is slowly being controlled and accepted as a "new way of life."

Certain markets are going to get stronger, others will dwindle. Some will adapt. The question is which markets?

WIFI, Online Sales, Medical, Food Staples, Energy all seem like winners.

Entertainment and travel will flourish again once the COVID treatment is established.

Any thoughts on these/others as winners? Any thoughts on losers?

Ideas?

Thanks.

FWIW, the Wellington fund has sizeable increased its holdings of Google and Apple shares. Microsoft remains the largest holding.

 

[brett]

Where we live they are testing anyone over 65, plus of course anyone who thinks he or she may have it. Spouse filled out the form. Got a call, some questons. Then a call four days later to show up at the drive in test area this afternoon.. Twenty minutes later we were driving out. Results in four days, on Tues PM, by email. Here's hoping it is negative.

My cousin has been on a respirator for 10 days with only a slight improvement.
Not good.

 

[ArmchairMillionaire23]

From three months ago the DJ was down 35.5% on 3/23. As of yesterdays close, the DJ is down 17.7%. So we're halfway back after 13 trading days or 17 days.

Glad I didn't sell anything once again. We've made back lots of our paper losses already.

Hope those of you trying to catch a falling knife, and then buy back in had your timing down pat. And of course, this could all reverse course anytime, so any lucky traders can still blow it...

We rebalanced on March 18th. Not trying to time the market or 'catch the bottom' but I noticed our bond allocation was up to 48% so I rebalanced all our accounts back to a 60/40 mix. We have an Investment Policy Statement which states we will rebalance semi-annually as needed or when our bond allocation varies by more than 5%. The market was falling so fast in March and I do not check my allocation every day so the bond allocation had climbed up to 48% before I knew it. At the bottom we were down about 22%. As of this morning we were only down 9% from the peak around three months ago.
I'll take it. 2-1/2 years ago I was still 100% invested in stocks. Then I switched to a 75/25 allocation. Then the first week of this year I switched to a 60/40 mix in my accounts due to being 5 years away from my (hopefully) early retirement date.
I consider myself fortunate and lucky. Hopefully the luck holds and things keep getting better and there is a decent recovery.

 

[Doc0]

About 15 - 20 trillion in value was destroyed across the world. Stocks in the USA are the only thing going up and that's due to money printing not because the companies are worth reflating. The FED will not be able to reflate them, because this is a demand driven event. Ain't nobody going out to buy a Ford F-150 on stimulus money. They're going to stuff it in the mattress. Presently the FED is supporting liquidity PERIOD. If the FED didn't support liquidity prices would be down 80%. 20 trillion down and 6 trillion printed leaves a 14 trillion deflation yet to be unwound and realized. This is not a recovery. This is like giving adrenaline to a dying patient. I think we are going to witness an insolvency event at the end of the year or early next year. It's likely 1/3 of the businesses will be gone permanently meaning economic output will be gone permanently and unemployment will happen permanently. Who's Microsoft going to sell software to if there are no businesses and no employed consumers? This is the definition of depression. Some day new business will reappear and the cycle will start again, but the old cycle has ended. The QQQ is actually up for the year, if I owned QQQ I'd sell that somobitch and buy some gold after gold sells off, which it is in the process of doing.

 

[teejayevans]

I’m not as negative as Doc0 but I did sell VTI I bought on the dip, and will just stick the money in a MM account until there’s more stability. If we don’t get back to normalcy by fall, then it’s going to get ugly especially with elections ongoing.

 

[Doc0]

Some folks keep talking about "Herd Immunity". How well has this worked for Ebola Virus, HIV, Rabies, Marburg virus, Small Pox, Influenza, Hanta Virus, Dengue, SARS CoV, Rotavirus, SARS CoV2, or Mers? I have not heard that "herd immunity" works for these. The only control for some of these is a vaccine. Does anyone have documented proof that "herd immunity" is responsible for the control of any of these deadly viruses.
Until there is a control mechanism of some kind for Covid-19 that includes accurate and fast detection with effective vaccines I don't see there being anything but a relapse in the medical arena with a corresponding relapse in the financial arena. And we have yet to hear much from countries in the southern hemisphere except for Australia.



Cheers!

It yet to be winter in the south. Wuhan is at the latitude of Atlanta. Those other viruses never reached pandemic status. Covid-19 is much better at infection than the others. HIV fro example is blood and sexual transmission so pretty hard to pass. The reason it became endemic in the gay population was promiscuity. In the IV drug abuse community was needle sharing, highly dangerous but low volume prospects on a herd immunity plane. Sars was deadly but not that good at transmission. Mers was even more deadly but not that great at transmission. Covid-19 can last for half a day on the handle of a gas pump handle. It is extremely good at transmission. Air travel was the mix master that got it started world wide. If China had been honest it could have been stopped and localized by a hard quarantine on air travel. Instead the narrative that human to human transmission was not possible and it was strictly animal to human was promulgated by China.

Entire choirs have gotten the disease with multiple deaths just by singing in each others presence. In Korea the original super infection was in a church where they did several hours of praise and worship singing. 1 person walked in, sung her ass off and 250 walked out with the infection. Spread is not just by droplet but airborne as well. Small pox is a better example of herd immunity, so is mumps and measles. They are HIGHLY invective and the only way they were solved was by inoculation UNTIL there was herd immunity. Since we no longer vaccinate that disease has some real probability of recurrence. I've seen pictures of cases of small pox walk across the southern boarder, so it's not 100% gone. Small pox as a novel infection nearly wiped out native American tribes in some places.

 

[Cricky]

Yes, smallpox is gone, except for a few vials in a freezer here in Atlanta and a few more in Russia. No, you haven’t seen real, current picture of smallpox “cases” (I think you meant people with smallpox, not luggage) crossing the border. It was a pretty good response up to that point though.