Taxing times - prevail, as for the first time, Americans would likely prefer paying taxes 'on-time' by today, rather than having extensions for reasons that are 'taxing' every aspect of our lives during the current environment.
As a virus ravages so much that we've been accustomed to, markets did rally as expected, but as forewarned for several days, became excessive.
There are various 'shoes to drop ahead', and some may be favorable. But at the same time, most professional investors became too sanguine more recently, during the extended phases of the projected rebound.
So now, at the same time we don't presume huge collapse, we seriously do recognize the challenges involved in 'adjusting' to the new-normal as it is broadly termed, and hence this expected S&P retrenchment (of course news sensitive) is likely not the end of decline, even if we hold-together at least briefly based on any symbolic favorable news.
Here is our Executive daily summary for today:
- Too much enthusiasm about a small group of (mostly old-era) stocks
- Big banks concerned about the economy, which varies regionally, but the major banks have lent on presumptions that aren't valid
- Chasing a dwindling list of values sets-up prospects of shakeouts
- I've argued home (and commercial) property values wouldn't hold, and most stocks in the sector remain on the defensive as they are
- Stocks pullback was looked for but not terribly ugly given hoped-for outlines related to 'reopening the economy'(on a rolling basis)
- NASDAQ was soft; with some technology stocks relatively firm (QQQ)
- Russell was weaker-yet; primarily as many small bank components were down (and among banks we warned about just yesterday)
- Crude Oil (BNO) plummets to 18-year low, as Texas Railroad Commission delays any decision after yesterday's sparring until next Tuesday
- The failure of an Oil rally to materialize was a given based on hostility by many Texas Oil Operators in yesterday's virtual meeting
- Economic revival delay prospects aren't fully appreciated by markets, and in many cases by early viral suppression expectations
- Additional rounds of stimulus are going to be necessary, even with an early announcement of a conservative (?) reopening schedule
- Despite a number of new 'possible' antiviral entries (Vanda today), there's really a mixed-bag of coronavirus news to contend with
- Examples of extremes: Germany ready to open their economy within days, while Muslim countries face catastrophic consequences of so many clerics ignoring regulations regarding mass gatherings
- Banks and other stocks hit are not so much responding to what's already happened, but the 'guidance' (of which there is little to none) about what's forthcoming (they 'assume' Covid's peaking too)
- We believe the world IS coming-together (generally, even WHO will likely back-off their hostility to the truth about their Director's stance), and we will see drugs with realistic efficacy towards Covid-19
- If the timeline for drugs 'suggests' socialization with controls (there is no delusion about returning to pre-Covid 'normal'), the S&P (SPY) can move higher (especially if OIL eventually joins-in) later, but not very near-term unless there's a 'game-changing' breakthrough that's elusive so far
- Overall Covid-19 tests dropped about 30% week/over/week, likely a reflection of a bit less panic given some 'social distancing' success
- Abbott Labs (ABT) suggests the fast-test will become widely available next week, while it's the antibody test which becomes perhaps a priority for the majority of people seeking knowledge of possible immunity
- Los Angeles Mayor tells CNN he 'may' ban 'all' concerts, sporting or other public events, until 2021 (this might set a National pattern)
- Trump threatens to 'adjourn' Congress to get his Judges approved (or so it sounds based on today's News Conference) in a 'recess' time
- Trump said it was 'inappropriate' to talk about his conversations with China's President Xi, about the Wuhan Lab (with regard to the latest story being a possible conveyance of coronavirus by a lab worker to her boyfriend who then visited the wet market, as speculation goes)
- Let's consider not addressing this as a 'non-denial denial' or in this case a non-confirmed confirmation, that they indeed talked about it
- Secretary of State Pompeo called upon China to 'let the world know', in an evening interview about the danger the Communist Party had allowed before 'coming clean' that there was an unfolding epidemic
- We have explored and speculated about origins of this virus cover-up since January, going beyond what mainstream media reported,,which finds them now gingerly moving forward with assessing the reality.
Daily action - delivered the anticipated down-up-down pattern and we'll expect something similar tomorrow, as exhaustion evolves with alternating swings perhaps, but should be increasingly sobered given the reality of a slow rolling-reopening of the American economy. (NYA)
Thursday's outline of 'how' and what sectors will be reopened is sort of an anticipation, though that may still be premature as it seems impossible for all the input from executives and others the President has convened for (mostly virtual) conferences to condense into a schedule quite that fast. (COMP)
The overall pattern has unfolded now, after months generally as outlined; both as regards last year's extended upside, the distributional top back in January, the correction elevated to 'crash' conditions, and of course the so-called 'Inger Bottom' about a month ago. (VIX)
Currently we projected and still expect this to exhaust or consolidate a bit at least, barring a miracle breakthrough on the science front (one of those several 'drug' candidates being proven to 'take death off the table' might suffice, but that's slightly less of a game-changer than it might have been, given that we know what kind of lingering side effects can, but not always, emerge in the course of this horrible coronavirus, and the after-effects.
Thursday's action should generally be defensive even during rebounds.
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