2020 market expectations and positioning

[Merg91]

Be afraid be very afraid?

rate cuts are only temporary solution.
makes the bubble grow bigger. with that extra liquidity, people buy more stocks. -_-
the next crash will be bad.

what is needed is solutions like tax cuts etc.

 

[iantao99]

Covid-19 is clearly spreading in EU.
Italy has closed its entire country's schools to contain the spread.

2 digit new cases in US, including community spread in NYC.

All will eventually impact global economy .

Market ignored the events or it was already priced in last week's plunged?

News mentioned market rally due Biden's win... BS?

 

[ocs_woodlands]

Biden super Tuesday is the reason??

Well,... let's see what someone cooks up for Wednesday....

The real reason, imo, is simply high volatility.. so one day ++++++, another day - - - - -

 

[Merg91]

This kid just proclaimed it the day before.......

NEW YORK (BLOOMBERG) - They bought the rumour, sold the news, and now investors are back to their real obsession: imagining what a recession looks like in equities from the coronavirus. It's not a pretty picture.

"The markets worry with intra-meeting Fed rate cuts, what does the Fed know that we don't know?" John Augustine, chief investment officer at Huntington Private Bank

 

[Kapish]

Biden super Tuesday is the reason??

Well,... let's see what someone cooks up for Wednesday....

The real reason, imo, is simply high volatility.. so one day ++++++, another day - - - - -

whatever the reason traders like me make bank
volatility is my best friend

 

[d9_lives]

I'd like to share this good read that I found in the boglehead forum.
(I am not that dogmatic).

http://www.oncoursefp.com/files/Vectors March 2020 final.pdf

You're welcome.

 

[DukeCS33]

I'd like to share this good read that I found in the boglehead forum.
(I am not that dogmatic).

http://www.oncoursefp.com/files/Vectors March 2020 final.pdf

You're welcome.

Good article. Thks.

 

[Hello_Kitty]

Covid-19 is clearly spreading in EU.
Italy has closed its entire country's schools to contain the spread.

2 digit new cases in US, including community spread in NYC.

All will eventually impact global economy .

Market ignored the events or it was already priced in last week's plunged?

News mentioned market rally due Biden's win... BS?

covid no impact to market. up and up. huat ah!!!

 

[Hello_Kitty]

One day does not change the global macro outlook. You getting too desperate for the market to soar?

it is actually soAring yesterday and today will be up too!!!

 

[DukeCS33]

The overnight price action appears as if the Market has totally ignored Covid 19 and latched on to the 50bps cut and Biden's results on SuperTuesday to buy up the market. So where were the sellers that were pushing the SP down just 2 nights ago? The strong selling coupled by heavy volume then, suggests that the funds were in. Now there are some ways to interpret this - climatic volume hides buying from smart monies... so was that smart monies looking to scoop things up?
Last night, we had a strong surge but look at the volume - it was significantly lesser than the prior 2 days. It is still high volume but way lesser than prior 2 days. Would this then suggest that the smart monies are not backing this overnight rally? There may be institutional monies pushing as with volume that is high but the smart monies? Maybe they are only willing to buy at lower levels and not at current levels.... or maybe they were absent altogether which presents a stark picture that the selling 2 days ago were all funds looking to exit and last night's rally profit taking by short term funds. The jury is yet to be out but I note a few key points:
1. The rally from the bottom was resisted and turned at the 50% Fibonacci mark at 3125
2. Algo funds appear to be testing and pushing minor boundaries on both ends in the recent selloffs and rallies.
3. 3050 level is that level of congestion where the battle appears to be fought and is a key pivotal point.

From a fundamental perspective, the Central banks' actions so far would not mitigate the effects of a recession caused by a virus due to both demand and supply shock. Clearly, the professional market did not believe in Fed's cuts and hence that sell off on announcement. However, given the reaction observed yesterday, we may need a more "serious" infection headline to spark the next sell off. And I would venture to say that we can only expect such headline news to get more serious as containment efforts have clearly failed.

On a whole, I would opine that we currently have a technical rebound. My macro interpretation is that it is still early days and that the only cure for the market's malaise / Covid 19, is scientific and not fiscal nor monetary. I would stick to my gameplan to trade short term and play the volatility to my advantage. Key direction is short (sell on rallies) and more on break below recent lows.

PS: To forumers who privately message me to look at certain stocks or for views, I would apologise if you did not receive my response. It takes time and effort to analyse - if you ask me, I would do some homework before replying.

 

[BBCWatcher]

If you don't invest you will never lose money.

I realize this was a joke, but there is some inflation in most currencies, including Singapore dollar inflation. In January, 2020, Singstat estimated 0.8% year over year inflation, based on the Consumer Price Index (CPI). If you're not at least keeping up with inflation net of all costs, you're losing purchasing power.

There are some investors who are willing to lose purchasing power over time. The easiest way to see this right now is to look at real return sovereign bonds, which are available from several governments including from the U.S. Treasury. U.S. Treasury Inflation Protected Securities (TIPS) dipped into negative yields across all maturities this week, even out to 30 years. Currently, as I write this, the 30 year U.S. TIPS is offering a mere 1 basis point yield. For U.S. investors TIPS interest is taxable, so on an after tax basis this is still a negative real yield.

It seems pretty crazy to me, but here we are. I've also seen an article suggesting that, this week, the 10 year U.S. Treasury has hit a record low nominal yield since 1871, and the 1871 limit is only because nobody has been able to go back yet and reconstruct U.S. Treasury yields prior to 1871. Let that sink in for a minute: this is a record low nominal yield for the past 150 years on the world's largest economy's sovereign debt. Wow.

 

[Mecisteus]

I realize this was a joke, but there is some inflation in most currencies, including Singapore dollar inflation. In January, 2020, Singstat estimated 0.8% year over year inflation, based on the Consumer Price Index (CPI). If you're not at least keeping up with inflation net of all costs, you're losing purchasing power.

Usually when people look at returns, they usually compare nominal returns.

If you don't invest and hold cash, basically your nominal return is 0%.

If you invest, you potentially get the nominal return of that index or something.

So it is fair to compare nominal with nominal returns.

But you are right if you want to compare real returns though.

 

[revhappy]

I realize this was a joke, but there is some inflation in most currencies, including Singapore dollar inflation. In January, 2020, Singstat estimated 0.8% year over year inflation, based on the Consumer Price Index (CPI). If you're not at least keeping up with inflation net of all costs, you're losing purchasing power.

There are some investors who are willing to lose purchasing power over time. The easiest way to see this right now is to look at real return sovereign bonds, which are available from several governments including from the U.S. Treasury. U.S. Treasury Inflation Protected Securities (TIPS) dipped into negative yields across all maturities this week, even out to 30 years. Currently, as I write this, the 30 year U.S. TIPS is offering a mere 1 basis point yield. For U.S. investors TIPS interest is taxable, so on an after tax basis this is still a negative real yield.

It seems pretty crazy to me, but here we are. I've also seen an article suggesting that, this week, the 10 year U.S. Treasury has hit a record low nominal yield since 1871, and the 1871 limit is only because nobody has been able to go back yet and reconstruct U.S. Treasury yields prior to 1871. Let that sink in for a minute: this is a record low nominal yield for the past 150 years on the world's largest economy's sovereign debt. Wow.

I read some fund managers now believe, bonds do not work in the same way in a diversified portfolio as they used to before. Yields can only go so much lower after they hit zero. So they are now replacing bond allocation with gold.

 

[NewInvestor]

Just look at how well SG REITs have been performing since the last Fed rate cut. Ascendas REIT is at an all time high! As more virus cases emerge around the world (not just in the US), more countries will cut interest rates (to stimulate growth) and yield assets will continue to soar.

 

[DukeCS33]

I read some fund managers now believe, bonds do not work in the same way in a diversified portfolio as they used to before. Yields can only go so much lower after they hit zero. So they are now replacing bond allocation with gold.

If all the central banks decide to cut rates to below zero, that could push bond yields to negative as well.

 

[polyglob]

It seems pretty crazy to me, but here we are. I've also seen an article suggesting that, this week, the 10 year U.S. Treasury has hit a record low nominal yield since 1871, and the 1871 limit is only because nobody has been able to go back yet and reconstruct U.S. Treasury yields prior to 1871. Let that sink in for a minute: this is a record low nominal yield for the past 150 years on the world's largest economy's sovereign debt. Wow.

Agree with your overall message. But above para - US civil war was 1861-1865. Did the US economy become the largest in the world 6 years after their civil war ended?

 

[revhappy]

Just look at how well SG REITs have been performing since the last Fed rate cut. Ascendas REIT is at an all time high! As more virus cases emerge around the world (not just in the US), more countries will cut interest rates (to stimulate growth) and yield assets will continue to soar.

Amazing. So they are not pricing in the hit from the virus, which could potentially be companies laying off staff and vacating the floors and not being able to pay rents.

They are pricing in the positive that the lower interest rate will improve their bottomline.

Perfect! So REITs will always go up. Even if there is recession, they will borrow at negative yields and pay back less to the borrower and than what they borrowed and the difference will be paid out as dividend yield to the shareholders. Wow! What an utopian world we are living in.

 

[DukeCS33]

Just look at how well SG REITs have been performing since the last Fed rate cut. Ascendas REIT is at an all time high! As more virus cases emerge around the world (not just in the US), more countries will cut interest rates (to stimulate growth) and yield assets will continue to soar.

Do you not think that Reits share price depends on their underlying performance? As we get more and more virus cases, the risk of a recession becomes higher and DPU may plunge. The higher the reits fly, the harder the fall.

 

[Merg91]

COVID-19 creates more fear in kiasi than its worth.

You see those who wear masks here are the young and healthy ones who hoarded too many.

 

[revhappy]

If all the central banks decide to cut rates to below zero, that could push bond yields to negative as well.

Yes, but how much negative? Below zero, it doesnt work with the same linearity as above zero. Look at Europe and Japan, after they hit zero, they havent been able to do much.