I am jumping on a plane in a few minutes to come home from San Diego, where I was on a panel led by Jane Wells with the CFA Society of San Diego.  Clearly, there is enormous fear given the speed and severity of the drop.  The hardest part about expecting the market to stabilize is there is no way to judge what is going to happen with the Covid-19 over coming days and how hard the economy is going to be impacted.  This is one of those times where we need to differentiate between the economy and the stock market.  Our view expressed in our ‘Time for the Pop’ post is that human nature has likely pulled forward the current risk from the virus with one of the sharpest 6-day declines in history creating the environment for a sharp snap back rally that should recover some of what has been lost.

Our playbook has not changed despite the more than 10% drop in the S&P 500 in just 6 sessions:

  1. We expect a sharp reflex rally.
  2. The reflex rally should last a few weeks.
  3. The market is likely to test the low as the weaker economic stats begin coming out.
  4. We are looking to go on offense as our intermediate-term indicators reach extreme levels.

Today should be very volatile, and I will comment from the plane as long as the wifi is working.

 

Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expensesAll data points are sourced from Bloomberg as of 2/28/2020 unless noted otherwise.




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