You misunderstand me. I am not suggesting that we are headed for a real world version of "The Walking Dead" where the zombies cough a lot. I am suggesting that risk assets are priced for a range of outcomes that seem to range from sunny to surface of the sun. Even if we are sitting around the campfire laughing at the pandemic hysteria a year from now, I think risk assets are likely due for a repricing in the meantime as some less salubrious possible outcomes get added to the range.
Like many here, I've been scratching my head at Mr. Market's reaction (so far) to COVID-19.
First, a couple disclosures:
I have now sold over 100K in equities as the market continued to climb (including a bit Friday when the market definitely wasn't climbing).
I also am a Marriott stockholder, with over $57K in Marriott stock (as of Friday close). While the stock is down, I'm amazed at how well it has held up...especially since the comps in China will have to be absolutely terrible.
So I keep asking myself what am I missing? Is it just "ignorance is bliss" as I see busy roads here and apparently no change to domestic life? Or is this a see through event, i.e. everyone KNOWS that places like Marriott will have a very very crappy first quarter (at least in certain regions) but expectations are that things will return to normal in a reasonable time frame?
Or is it that we don't see it but the markets are being "helped" though liquidity injections - and all that new buying power has to go SOMEWHERE. Maybe mostly in "safe" government bonds (thus 10 year at 1.47%) but the waves of liquidity also have made their way into just about all asset classes - bonds up, gold up, bitcoin up, real estate up...and stocks up.
I don't know. I had been running under the assumption that that market wasn't done with the bull, that late 2019 was just the beginning of the wild end of bull market phase....but I've been wondering if COVID-19 is the external shock that ends the run. Maybe we would be a lot higher already w/o the COVID-19 situation.
Sorry for the rambling thoughts as I, like many of you, try to work our way through this.