10 Facts Continuing To Point To Substantial Upside Ahead In Equities
It was only a few months ago when investors couldn't stop drooling all over themselves while dragging their knuckles on the ground to pounce on any type of risk they could find. A mere three months later, due to what is the equivalent of 9.0 earthquake to shake the globe, the prevailing view has become one of depressive gloom and doom unlike anything since the financial crisis. Let's look at some facts: The economy is on the verge of being rebooted in incremental fashion. Participation in equities is at the lows of this bull market, with cash positions at levels not seen since 2009. Bearish sentiment is borderline maniacal in nature, with numerous measures pointing to extreme fear remaining in the market despite one of the great rallies of all-time since the March lows. Interest rates are down near zero across the developed world, making for cheap borrowing. Commodity prices are at rock bottom levels, allowing for cheap building, production and transportation. Stimulus is not just at record levels, but is coming from every direction in what is a jaw dropping fashion. Consumers have been caged for many weeks now, while spending very little on much of anything except Netflix and Fruity Pebbles, creating savings all the meanwhile. A significant percentage of the unemployed are making more on unemployment and stimulus than they were on the job. Massive amounts of capital are moving towards technology, as it allows for distancing while maintaining or perhaps increasing efficiency. Government stimulus has momentum behind it for many months to come, meaning further rounds of stimulus, with increasing attention paid to making individual earners feel whole. The aforementioned points is what the market has reacted to over the past few weeks, with an eye on how these numerous influences will translate during the second half of the year. Thus far, the market sees these influences as translating in an overwhelmingly bullish fashion. This doesn't mean that the market rallies for years on end here against of backdrop of transformative economic bliss to come out of this boiling pot of virus induced misery. What it does mean is that coming out of this disastrous period, there are enough factors producing a very substantial tailwind that the markets can produce results that will be both unexpected and amplified in nature, due to the exact proper mix of overwhelming bearish sentiment and historic stimulus unlike anything experienced in modern times. The upside remains explosive. Invest accordingly. Zenolytics now offers Turning Points and ETF Pro premium service Click here for details. Disclaimer This website is for informational purposes only and does not constitute a...
Here Is Where The S&P 500 Is Headed For The Rest of 2020
Over the past several weeks I've gone over in a myriad of notes why the buying opportunity here is on par, if not exponentially greater, than late 2018 when I was on hands and knees begging anyone who would listen to gain as much tech exposure as possible. This opportunity, however, has a number of key differences that makes it potentially more lucrative than anything 2019 could offer in terms of upside: QE has been a decade plus project for the Fed that they have fine tuned in whatever mad science lab they have in the basement of the NY Fed building since 2008. They are now unleashing all of the weapons they have been perfecting on the market in a rapid fire, sequentially relevant manner. The virus has accelerated everything: Monetary policy, fiscal policy, social change, geopolitical tensions, energy policy. Every single thing that was moving at 55 miles per hour coming into 2020 is now flying into the stratosphere at warp speed. This acceleration cycle also influences price behavior. Price action that would take years is being compressed into a matter of weeks and months. The level of bearishness with respect to the current market is unprecedented during this secular bull market. In fact, it was be unprecedented in modern times. It only took two months of virus related Armageddon to get everyone to believe that society is melting into a hot blob of its former self, causing all types of financial decisions to be made that will ultimately be highly regrettable. All of these factors when taken together create a synergy on the upside that hasn't been experienced during the entirety of this bull market. We have the prerequisite amount of bearish sentiment to allow for nearly uninterrupted upside; we have a force at work that has created an acceleration of price; and we have the Fed fanning the flames with high octane gasoline that they will be applying to the market for the entirety of 2020. Where does that leave the market? Ever expanding, mind numbing volatility is ahead. In the current phase that volatility will be predominately on the upside, with a continued expansion of the multi-year pattern forming in the S&P 500. Here is what that looks like on the chart: This translates to approximately 3600 on the S&P 500 by late Q3/early Q4. The possibility of an overshoot does exist to take the S&P 500 to 3700 in that time frame. The only thing more jarring to investors than this level of volatility will be the persistence with which it pursues it on the upside. Of course, the current pace of...
The Current Market All Comes Down To One Simple Question
In the midst of the countdown to Armageddon in March the Fed decided it was time to go nuclear on the markets. That singular event is going to drive market performance for the remainder of 2020. Almost daily in recent weeks, the Fed is announcing new unprecedented measures meant to get the wheels of the future economy greased to the maximum extent while mitigating the negative consequences faced in the current economy. This is a substantial development that it seems is being ignored by the disproportionately large contingent of skeptics out there. Let's be clear about exactly what the Fed has done here: In the span of the a few weeks they have injected the economy with enough liquidity to arrest the equity market decline. At the very same time, massive monetary stimulus with fiscal stimulus that will be felt down the road act as rocket fuel for the economy during Q3 & Q4 once the developed world returns to some semblance of its former self. Pillar by pillar the foundation supporting every bearish argument that preceded Fed actions has been vaporized through aggressive monetary policy. The remaining pillars of the bearish argument are based on current data, which, while being atrocious, has more than been factored in by a historic decline in equities during February and March. This is exactly why a retest of the current lows not only won't occur, but the mere suggestion of it is reason to perpetually ignore any analyst, trader or individual who makes that claim. It displays a complete misunderstanding of the current nature of the market. It says that record stimulus will have negative consequences. It says that the markets are backwards looking instead of discounting future developments. Popular wisdom says that calamities such as the one we are currently in the midst of create dynamics that are impossible to judge accurately due to all of the variables involved. While this may seem like a logical conclusion, the illogical nature of the markets, in fact, create an extraordinarily simple investment equation during seemingly impossible to judge events. What periods of severe distress accomplish is to remove nearly every variable that previously mattered to investors. For example, earnings, economic numbers, geopolitical events not related to the crisis. All of these variables that previously would have caused a logical reaction in the markets, no longer accomplish much of anything other than to confuse investors. Witness the scratching of the head by the masses to recent market action in light of the economic data to highlight the most recent example. This is due to the fact that the investment equation from this point forward...
The Great Acceleration Cycle
There are presently three distinct factors that have a high probability of being misunderstood by investors. This misunderstanding has created a slingshot effect in the market, where viewpoints have been pulled back to maximum tension, with the potential release in the opposite direction being unlike anything we have experienced in recent memory, creating one part of The Great Acceleration Cycle. The three misunderstood factors are as follows: 1. Virus 2. Economy 3. QE Virus: Over the past week, we have started to see a significant amount of evidence that the numbers used to justify what is basically a complete shutdown of the global economy were inflated substantially. It starts with the Imperial College study that was cited by global leaders as a plausible scenario, justifying the shutdown of numerous countries. In that study it was expected that 500,000 would die in the UK. The author of the study last week revised that number down to 20,000 people or fewer. Given that the Imperial College study was the preeminent research on the matter, this revision was jarring, despite the fact that it was under-reported by the mainstream press. In the United States, projections had NYC at 61000 hospitalized by April 4th. On April 4th NYC had 14000 hospitalized. Governor Cuomo today said that the number of deaths has been dropping for the first time. This is happening well before the most optimistic case peak 7 days from now. Other pieces of data from major cities, include Los Angeles, with one of the largest hospitals in Cedars Sinai having 115 Covid cases on March 31st, up from 50 cases on March 17th. A relatively insignificant increase versus projections. Internationally, both Italy and France are reporting significant drops in deaths today for the first time. The alarmist nature of the initial projections, few of which have come to fruition, is the first band pulled to maximum tension on the slingshot. Economy: The most important factor to realize with respect to current economic projections is that they have been modeled around virus projections. If the virus projections are off, then the economic projections are equally incorrect. While the job losses and economic ramifications of this shutdown are jarring to witness, projections fail to take into account the effectiveness of fiscal and monetary policy measures, along with the evolution of the job market once the economy reopens. Other factors include the ability of businesses in food and entertainment to bounce back. While this view can't be quantified, my sense is that once developed economies reopen there will be a united, patriotic stand that embraces small businesses that have suffered through this. Those who are...