The Dow Jones Industrial Average tumbled into a bear market in a mere 19 trading days spanning from mid-February to early-March, thanks to the COVID-19 coronavirus. The 20% fall — the traditional definition of a bear market — from an all-time high ended a more-than decade-long bull market.
Nicholas Jasinski for Barron’s:
By that same definition, the coronavirus bear market also ended up being the shortest-lived in history.
On Thursday, the Dow surpassed a 20% gain from its low point on Monday — signifying the beginning of a new bull market after just 11 trading days in a bear market. A late-afternoon rally pushed the index above 22,310.32 to enter a new bull market.
It has been a roaring three-day rally for the Dow: up 11.4% on Tuesday, up 2.4% on Wednesday, and up 6.4% on Thursday.
MacDailyNews Take: Up and down we go; where it ends, nobody knows!
Too soon to make the statements being made. There are many reasons for this. What if the pandemic makes a quick rerun ie. mutates into a more dangerous form? We can’t come up with a vaccine or cure as fast as many people think (especially the person in the white house who still thinks that even with the expanding scope of the Pandemic says that it will be by Easter Sunday that it will basically over).
So let us be cautious about what we predict off the top of our heads as nature has a way of doing what it wants not what we would like it to do.
What if …. that is the problem. Everyone is reacting to the the what if’s and not what is. Currently what is happening is that people are over reacting, jobs are being lost and the economy damaged. More people will be hurt by over reaction of the virus vs the virus.
There’s both reaction and over-reaction, but the economy had long-term, very serious economic issues that the V “simply” exposed, a little sooner than expected…so, as bad as the V is, the depth of the financial situ is hardly yet apparent.
The largest financial package in history is reported to “support “ the economy for weeks, when another will be needed. I can only assume others following will be needed. The US is not only funding unemployment, med needs and other stateside needs, we’re bringing liquidity (freeing up debt) in numerous other countries.
A worldwide epidemic (pin), literally met a world-wide financial bubble. To say what’s the fitting/needed/expected reaction and what’s over-reaction is the TTTTrillion dollar question, as we’ve not been here before.
Mango = 👍🏻
You have it right. The lady MD at the CDC, works with Dr. Faucci, has stated that the unknown numbers of people with mild symptoms from COVID render the % stats regarding death rates as unusable. Sensationalizing reports that claim high death rates are based solely on those either tested (a very small percentage) or being treated so the rates are not valid. She is highly credible.
“It is well enough that people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning.’ Henry Ford
In-the-weeds relevance to Ford’s quote….
https://www.google.com/amp/s/www.bloomberg.com/amp/opinion/articles/2020-03-27/federal-reserve-s-financial-cure-risks-being-worse-than-disease
We are experiencing a two-headed hydra.
LOL. No, this is not a bull market. This thing is headed back down. On Monday, NY state alone will have close to 100,000 cases and the world total will break 1,000,000. India is on 21 day lockdown, most of Europe is locked down. England is going to blow up like Spain because they delayed closing schools. Demand will not magically reappear in 3 weeks. Cruise, airline, and hospitality is dead for the year. We are looking at Italy-like conditions in NYC in the coming week or two, which will eventually peak, only to be followed around the US to New Orleans, Detroit, Chicago, Houston, Florida etc. Most likely, we will have to go to regional air travel bans to contain this. In the meantime, oil is now trading well below its commodity price of $23 (WTI) – as little as $8 to $15 bbl, well below Permian basin break-even of ~$43. While cheap oil will give us cheap gas which has a stimulative effect, most of us have nowhere to drive to and the worldwide contraction in demand is going to be upwards of 18M bbl per week in April. So, despite bailouts, energy sector is hosed and assets of companies like Chesapeake will be picked up by private equity for pennies on the dollar (and you know how good PE is for employment). Commodity oil will be in the teens in April.
This bounce is just wishful thinking and whistling past the (almost literal) graveyard combined with portfolio rebalancing, algorithmic trading, cash flow from commodities and flight from zero yield, all hyped by the same people who told you to buy when the market was down only 15-20%.
That said, I did pick up some AAPL 280 LEAPS when the underlying price reached $215, but I think it more likely than not we retest that low. No matter how good their earnings call and outlook is, the fact is that almost nobody is going to drop $1,000 on a phone upgrade right now, even with free handouts from the government. The only potential saving grace is that Apple will have the brains to join everyone else and not offer any guidance for Q2.
Agreed. Don’t sell your calves before a bull is around long enough to sire them…
So more likely a “dead cat bounce” than the start of a new long term bull market….
more like dribbling the dead cat on the way down…
JimBob: You raise some very valid points and you stated them quite well. I’m still a bit more optimistic for vaccines, drugs and testing kit availabilities to help in a few months. I guess I’m an AAPL fanboy since 1982 so I have a positive long-term faith (despite the shift in their mission statements after Jobs died). Thanks for you worthwhile analysis.
Thanks, citizen. I too, hold hope in science (being a scientist myself). In fact, there are a couple private companies as well as university teams that have come up with quick (10 min), cheap ($10) serological tests so quick and widespread screening can be done. Serological tests look for antibody response, so unlike the PCR tests which are looking for active virus, they will tell you if you’ve been exposed already and silently fought it off. The added bonus is that serum from these folks can be used to treat the worst cases.
We need serological testing ASAP – despite the claims of certain leaders that anyone can get tested and tests are widely available, my Dad who is elderly and high risk got his test March 18. Here it is March 27, he’s still sick, and his test has STILL not been read. That’s absurd. And it tells you the real infection numbers are off the charts compared to the official numbers (with a lower mortality rate, yes, but if this is spread is not slowed, the pileup at hospitals will bring that up). I have spoken with front line people at major hospitals and they are pretty much operating on the cusp right now.
So while I am betting against the market with respect to all this: shorting oil in a leveraged ETF as well as the major indices yesterday, I am also covering the upside with stock and options on one of the vaccine companies as well as stock in one of the companies that I think is most likely to get approval for the serological tests and get it to market first. Rather than pump those stocks here I’ll just say there are plenty of articles on those out there if you want to research them yourselves.
Suckers!
The only suckers are people like you who don’t understand the market and didn’t invest in foundational tech companies decades ago.
And then Trump, or Tim, or some analyst farts and it comes sliding down (or up) again.
No risk/no gain gam-bil-ing.
And I would not deny you the right by the way. I’m not the App Store.
“And then Trump, or Tim, or some analyst farts and it comes sliding down (or up) again.”
Yes, in the short term this happens to all the foundational tech stocks. In the long term this is not what happens. Not at all.
“No risk/no gain gam-bil-ing.”
Again you are thinking short term. I think and plan long term. Smart long term market investments have no more risk than walking out your front door every day. It is a shame you don’t understand the difference between short term and long term. You could make so much money. As I have.
I make it by doing something more interesting to me, to you godspeed.
“I make it by doing something more interesting to me, to you godspeed.”
I do many interesting things and I have more freedom to do anything I want because I understand that smart long term market investments are not gambling. Long term technological progress is inevitable. It can’t be stopped. Not in the long term. Ups and downs are only risky in the short term. Your point of view is right in the short term. However you couldn’t be more wrong in the long term. Don’t try and look down on smart long term investors or pretend you know anything about the market. It doesn’t suit you.
Okay, I wished you well and you had to keep going.
You’re wrong! The market will not grow unbounded, it’s not a “law of nature” like entropy will always increase. Or if it is… do tell…
But using conservative investing jargon that even I know, reward is proportional to risk. You’re describing a long term “sure thing”, which should yield low reward.
The market rewards or punishes change. Nothing more. Since we cannot possibly know all the variable and interactions of change, it statistical. i.e. Gambling!
“The market will not grow unbounded”
Nothing can grow to infinity duh. However the market does increase over the long term just like progress. Short term ups and downs are meaningless much like your understanding of the market.
“reward is proportional to risk. You’re describing a long term “sure thing”, which should yield low reward.”
I never said it was a sure thing. You can read right? Nothing can be 100 percent zero risk. The reward is low in the short term. It is only large in the long term. That is why Warren Buffet describes his method of investing as get rich slow.
Smart long term market investments are about as risky as walking out your front door each day. Everything has risk. Welcome to life. If the long term prospects of the market ever do completely tank money won’t matter anymore. Even the current pandemic hasn’t had much of a negative impact in the long term view. In the short term view which you dwell on it has been catastrophic.
I give up. You aren’t capable of understanding how time changes investment outcomes.
For first on+ lopngtf