This article was contributed by our good friends at Portfolio Wealth Global.
Don’t, Just Don’t Get Duped
The last time that the Dow Jones Industrial Average traded in this way was in October of 1929. This, to history lovers, should SOUND THE BLOODY ALARM.
We all know that markets have transitioned from all-time highs to bear market in only SIXTEEN TRADING SESSIONS, a record that will be hard to beat in our lifetimes.
The combined losses of stocks and bonds have been monumental, 2008-like even.
Everyone’s on edge. Stores are completely EMPTY. I have never before encountered such panic and I’ve traveled to war zones, had missiles dropped near me, been to refugee camps and to 3rd world countries during tropical storms, but this TAKES THE CAKE.
A classic diversification into stocks and bonds simply wasn’t enough to CURTAIL this MAYHEM. It’s shocking to see how QUICKLY the sentiment changed, but it’s also important to keep in mind that stocks have only erased 2016-2019 gains. The big picture could still be much more FRIGHTENING if and when companies have to begin firing employees.
This will be the crucial week for Trump’s presidency. Every day, he and his team will have to inspire CONFIDENCE in their plan and to show the people of this country that the prospect of containment is racing towards them.
It will be a do-or-die week for the Federal Reserve as well.
They MUST appease the credit markets. The central bank, in all LIKELIHOOD, will announce a HUGE slash of 0.75%, after the emergency 0.50% did nothing to BLOCK the bear market from steamrolling trillions of dollars of equity.
As you can see, this can end TERRIBLY for everyone. The market is following in the footsteps of the most INFAMOUS depression in American history. No one wants to go through that again.
Judging by the fact that up until now only 50 people have died on U.S. soil, the panic has PROBABLY reached maximum levels. To me, if the areas of community spread don’t show spikes in new cases, the notion that this more acute version of the seasonal flu is not the Black Plague will sink in. Slowly, but surely, industry, commerce, and trade will resume normalcy.
Certainly, it is very ENCOURAGING to see how CEOs are coming in, using their personal funds, and buying shares in their own companies.
Historically speaking, they are bottom fishing, so it’s a sign that they have faith in the RECOVERY from this period of disaster and pandemic.
Throughout the passing week, I’ve been hit with INNUMERABLE questions about what the future holds. I’m extremely optimistic, overall. This, to me, was UNDUE panic and should have been dealt with in a way that doesn’t shuts-off the global economy.
We can all learn from this situation. Financially, markets were OVERBOUGHT (just as I said) and needed this sort of shakeout.
For eleven years, we’ve enjoyed tremendous gains. In this context, we’re just fine.
What I don’t like to see is the SUPER-BUBBLE in bonds or the weird correlation between stocks and bonds:
In the coming days and weeks, we either return to our way of living or this PANDORA’S BOX unleashes its full FURY and WRATH on everyone.
The Federal Reserve has already bombarded the credit banking system with sums of debt that could alleviate poverty in Africa, but it seems that nothing is SUFFICIENT.
Tomorrow, we will begin sensing how the reaction to Washington’s plans is accepted.
This will have a lot to do with whether or not this spirals into a PROLONGED nightmare or if we’re starting a new, wiser and stronger path.
Clearly, with Bitcoin losing 50% in two days and with general equities looking like they have a rough patch ahead, mining stocks look GREAT, in comparison.