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.
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