The IMF in its April World Economic Outlook is projecting global output to contract by -3% in 2020 and is forecasting growth of 5.8% in 2021. For advanced economies, the IMF is calling for a contraction of -6.1% this year, and growth of 4.5%, next year; emerging markets are expecting 1% contraction and 6.6% growth, respectively. The stock market is pointing to a fast and furious turnaround at the moment. Did the market bottom on 3/23, is the recovery underway? Or, will it end up being a false positive?
The March employment report left no unanswered questions about the devastating economic impact from the pandemic. There were 713k total jobs eliminated in the private sector alone, according to the Establishment Survey, Private services which account for 71% of total GDP saw 659k job losses, ten times the amount for goods producers. Leisure and hospitality were hit the hardest, shedding 459k positions. Drilling down to specific industries – tour operators, restaurants, bars, childcare, furnishings, lodging, and others suffered significantly. On the positive front – federal, local governments, the central bank, warehousing, storage, data services added new hires. https://www.bls.gov/news.release/empsit.nr0.htm
The S&P 500 just endured two of the ten worst days since the Great Depression. The index of 500 leading companies plummeted -9.5%, and -12%, on 3/12 and 3/16, respectively. The experience has been undesirable. Market lore foretells that “Bear Market Bottoms” are unlikely to be singular moments, instead, painfully, more apt to be a process of events accompanied by unwanted volatility. The silver lining being higher lows. Generally, some catalysts assist in establishing bear market reversals, such as stimulative monetary and/or fiscal policy. It is then, the excess supply of sellers may dry up from exhaustion and capitulation. Basic economics, stocks either go up or down because of supply and demand. Once the supply/sellers mark down their merchandise to fire-sale prices, i.e. (liquidate their unwanted equity holdings), demand picks up as bargain hunters step in and buy on the cheap. Will steely nerved buyers be rewarded for their guts? Since 1929, there have been 17 bear markets, the longest and shortest time frames for the bottom to occur was 3.5 years in ’42, and 87 days in ’90. As of this post, we have witnessed the market falling -35.4% from its 2020 intraday high and low; the bear market is now on day 35. 1db.com/disclosures/
Economically speaking, growth isn’t everything; it is the only thing. A better tomorrow for future generations depends on a rising tide, that is, opportunities for all. Covid-19 is an enormous wrecking ball that will eventually end, we hope. Turning things around is going to be an uphill battle. To expedite the recovery, here is my reset wish list, even if it is far-fetched. 1db.com/disclosures/
By September 4, 1917, the DJIA fell into bear market territory (-20%), fueled by the Spanish flu pandemic. The first World War killing machine was in full force, tallying millions of casualties among soldiers and civilians. The ill-fated timing of the Spanish flu was more like a curse; the death toll from the sickness amounted to tens of millions. It was a dark period never to be forgotten. Now, we have the coronavirus. Medical experts and unified global leaders sounded a clarion call to warn of the potential perils. I have not seen fear of this kind since the Great Financial Crisis; there is a panic. Volatility is testing the circuit breakers; the bandwidth and scope of the gyrations during this episode ( covid19 – orange line) compared to the Spanish flu (blue line) are daunting. How long can this thick, dense, fear-based anxiety last? Unfortunately, no one knows. What we do know, for sure, is that reality goes on.
From early fall 1917, through mid-winter 1918, the stock market painfully suffered the barrage of bad news; by late summer, the United States would enter a recession. The economic destruction was akin to a Greek tragedy; things could not have been worse. Ten years later, from the 1917 lows, the Dow Jones Industrial Average gained 16% annually, according to dqydj. At the moment, global equities are retesting the lows, plagued by the uncertainty of the virus. Stock market selloffs do not go on forever; they bottom at some point, no one can pick when; then the market rallies, a level that can’t be selected by anyone (except by pure chance). 1db.com offers a Digital Advisory platform that enables savers and investors to invest incrementally, which is systematically and intermittently allocating investable funds as markets ebb and flow over time. This approach has worked quite well for savers for over a century up to February 19, 2020. Is this time different? 1db.com/disclosures/
Why? Because the merchandise is on
sale, in some cases, it’s #BOGO.
How? Incrementally, $25, $50, $100,
$500, whatever serves your situation. I have been investing $1,000 a week. By investing
in the markets automatically, savers are purchasing through ups and downs.
When? Now. Equities and risk assets
have fallen into bear market territory, -20%. For investors and savers planning
for the future, there are bargains to be had. Remember, the market was at record
highs on February 19th. It makes good sense to invest now.
Where? 1db.com offers
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Who? Everyone, our investment
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Mark Twain coined the phrase, “History does not repeat itself, but it often rhymes.” The COVID19 virus has upended the financial markets and brought cities and countries to a standstill. So far, coronavirus has infected 118,101 people around the globe; there have been 4,262 confirmed deaths according to the Johns Hopkins University. On the last day of 2019, China reported unusual pneumonia cases to the World Health Organization, proving to be smart and proactive by the Chinese government. The scenario has been well documented by journalists and newscasters by the day and hour. The question remains, when will this dark storm pass? In 1918, the world suffered the Spanish Flu pandemic infecting 27% of the global population and a death toll possibly near 100 million. Fortunately, the coronavirus appears to be far more under control, call me an optimist.
In the early 20th century, the Dow Jones Industrial Average witnessed a 33% selloff preceding the 1918 pandemic, by the summer of 1919 the index gained 63% from the lows and surpassed its previous peak. Will the coronavirus pass? Of course. When will the market find its footing? Hopefully, soon. 1db.com/disclosures/ #financialfitness