April 12, 2020
Weekly Market Outlook
By Keith Schneider
US stock indexes reversed last week’s downdraft (up between +7.9 to 14.9%) after getting massive injections of liquidity from the Fed and more stimulus from Capitol Hill. Small caps and value started to visibly outperform signaling the bottoming process is underway.
Of course, question is whether these unprecedented measures will be enough to overwhelm the impact of the virus. The wild card is how long will the quarantine last, and just when a return to normalcy will occur. According to Dr. Fauci, the US Health Advisor, normalcy will never happen or ever look the same.
Stress in investment grade corporate debt, muni bonds and high yield/junk debt was all alleviated by massive buying by the Federal Reserve, forcing shorts to cover. The spillover to other asset classes or sectors was palpable.
This week’s highlights are:
On a final note, one thing to watch longer term is the dollar, because the Feds actions over the past 35 years could cause a dethroning of the dollar (too much debt ….like Venezuela) as the worlds reserve currency, and our ability to prop up our markets will be over. The odds of this occurring increase every time we bail out the markets and our debt levels climb to unprecedented levels.
If you are a buy and hold type of investor the time to fire your advisor is NOW and rethink this strategy before it’s too late. Tracking what is leading on a relative basis is key to a profitable strategy, especially during these market conditions where there are only a handful of outliers. For more info about our proprietary Triple Play Indicator click this link.
Stay safe and best wishes for your trading.