Displaying items by tag: bear market

Friday, 10 July 2020 16:28

We May Be Headed for More Lockdowns

(New York)

Coronavirus cases across the country are surging. On Wednesday the US announced there were 62,000 new COVID cases, exceeding the record set the previous Friday by almost 5,000 cases. Some states, like California have actually started to reverse opening plans, not merely pause them as so many other states have. The huge surge in cases is leasing investors to fret that large-scale second lockdowns may be in the works. Anthony Fauci even openly said this yesterday, adding to fears.


FINSUM: Whether or not you think the case rise is just because of increased testing, the fact remains that as numbers soar, there is growing discourse about lockdowns. That is an undeniable risk to markets.

Published in Eq: Total Market

(New York)

Markets have been rough for the last few weeks. Investors are doubting the pace of the recovery because of a big renewed rise in cases and the possibility of new lockdowns. And according to market analysts, signs are increasingly pointing to another meltdown. If you study various volatility indexes, starting with the VIX, it is becoming clearer that another big move lower is on the horizon. The VIX and other indexes have recently shot back higher after a steady fall after the huge March volatility and their momentum indicates investors may panic sell and create another big correction.


FINSUM: We do not give much respect to technical analysis on its own, but it is useful (in our opinion) as a tool to quantify what one is seeing in the real world. Right now, this makes sense given the rising worries about new cases and lockdowns.

Published in Eq: Total Market
Friday, 12 June 2020 13:43

Beware the Rising Second Wave

(Dallas)

Markets tumbled yesterday, and it appeared to happen mostly because of the resignation that a second wave of COVID-19 was forming across the US. In several recently reopened states the number of hospitalizations has been surging, leading investors to fear that more lockdowns—and their corresponding economic damage—could be on the way. Top epidemiologists have been warning of a second wave, and one leading doctor said he worries about states reopening before they have the virus truly under control. “My worry is that we end up in a kind of stuttering, endless loop”, says Dr. Schneider of The Commonwealth Fund.


FINSUM: The market was priced for perfection, and a big second wave didn’t fit that narrative. Hence the 6% fall yesterday. Going to be choppy for a while as the market’s bad news antenna is back up.

Published in Eq: Total Market
Thursday, 04 June 2020 17:18

Hedge Funds Prepare for a Big Market Downturn

(New York)

Investment bank research teams all over Wall Street have been sounding the alarm about how untether from reality markets seem to be. Many are warning investors of another big fall in stocks, and at the same time are telling corporate customers to tap markets for funding as much as they can before another fall. Now hedge funds are joining too, saying it is time to pull back. One manager said “The markets are priced to perfection … The stability in equity markets does not reflect the job losses and the insolvencies ahead of us globally”. Paul Singer of Elliott Management made a specific call, saying “our gut tells us that a 50 per cent or deeper decline from the February top might be the ultimate path of global stock markets”.


FINSUM: In principal a big fall seems warranted, but it is hard to fight the Fed.

Published in Eq: Total Market
Tuesday, 02 June 2020 16:21

Citi Warns Markets to Tumble

(New York)

In a recommendation that speaks volumes to clients about the bank’s position on the markets, Citi put out a note to corporate clients this week which instructs them to tap markets for as much funding as they can get right now because the market is totally unrealistic. According to the co-head of investment banking at Citi, “We definitely feel that the markets are way ahead of reality. We really are telling every client to tap the market if they can because we think the pricing now couldn’t get any better”. He continued, “Markets are pricing a V [shaped recovery], everyone’s coming back to work, and this is going to be fine … I don’t think it’s going to be that easy quite frankly”.


FINSUM:A V-shaped recovery is highly unlikely at this point. We think the Nasdaq being where it is isn’t illogical because of how many of its constituents benefit from COVID. But for everyone else, this level of optimism seems disconnected from reality.

Published in Eq: Total Market
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