WASHINGTON – After a recent burst of spectacular stock market rallies ended on a sour note last Friday, it looked like we might get into trouble this week. And indeed we did, as April’s Fools, otherwise known as hedge funds, high-speed traders, the mega-rich and their pals ganged up to clobber Wall Street again. The en masse selling and shorting was back Wednesday. Big time. Successfully catching a batch of falling knives without getting killed now has less mortality risk than either the Wuhan coronavirus or even investing in stocks and bonds.
April’s Fools keep the negativity going
With statistically no one at work, with the media purposely terrorizing the populace 24/7 and urging them to target President Trump as a coronavirus failure. And with investing gurus – Wall Street’s April fools – unanimously proclaiming we haven’t seen the bottom of the bear market yet, what else could we expect from the elitist ghouls that run the investment game these days? They’re not just April’s fools. They’re the greatest and most consistently dangerous fools we’ve yet seen in this century.
Sober minded investors, however, have legitimate cause for concern. Every day, they feel as if they’re catching falling knives in this market, and those falling knives have caused a lot of bleeding. So investors remain seriously worried that the longer people hide out in their homes and the longer businesses large and small remain shuttered, the longer it will take to recover from the disaster that normal people still call the Wuhan coronavirus.
Another horrendous day
Here are the closing stats as presented by CNBC online, which, unfortunately, continues to expend much of its ammo on “We’re all gonna die!” stories. Just like their cable and network “news” pals and assorted other fools do all the time. At any rate…
“The Dow Jones Industrial Average traded 1,100 points lower, or 5%. The S&P 500 slid 5% while the Nasdaq Composite lost 4.9%. The major averages hit their session lows with less than one hour left in the trading session.
“President Donald Trump said Tuesday evening the U.S. should prepare for a ‘very, very painful two weeks’ from the rampant coronavirus. White House officials are projecting between 100,000 and 240,000 virus deaths in the U.S.
“‘This is going to be a rough two-week period,’ Trump said at a White House press conference. ‘When you look at night the kind of death that has been caused by this invisible enemy, it’s incredible.’”
Catching falling knives.
Elsewhere on the network…
…one investment advisor I still respect, Mohamed El-Erian, waxed practical when asked what a battered investor should do now that stocks and bonds have turned vicious and hostile.
“Mohamed El-Erian said Wednesday he would be hesitant to put cash to work, arguing the stock market is still on a downward trend due to the coronavirus pandemic.
“But he offered a roadmap for investors who feel inclined to add to their portfolios.
“‘Whatever cash you have, divide it over five installments,” El-Erian said on CNBC’s ‘Squawk Box,’ suggesting dollar cost averaging into the market over several months.
“El-Erian, chief economic advisor at Allianz, said he understands why some may think the strategy of averaging into the market ‘isn’t very sophisticated.’
“‘But no one can tell you for sure how these dynamics are going to evolve. We simply have not seen this before,’ he said, adding that nobody can pick the market’s exact bottom.”
“El-Erian’s remarks came as Wall Street was set up for declines on the first day of the second quarter. Dow futures were indicating opening losses of more than 800 points, following Tuesday’s 410-point drop.”
Sonders on market “triage”
Over on the login page at Charles Schwab, you can access a brief piece by the always-practical Liz Ann Sonders. Liz Ann is clearly not one of April’s fools. She discusses the potential effect of the notably good news from Washington last week. Namely, the stimulus package, of course, that investors and pundits already seem to have forgotten over the weekend.
“The huge spending package will help, but it’s hard to gauge its ultimate effectiveness when the severity of COVID-19’s economic impact remains to be seen, says Schwab Chief Investment Strategist Liz Ann Sonders.
“‘Fiscal “stimulus” at this stage is really a rescue or triage mission,’ Liz Ann says. ‘It’s unlikely to actually stimulate growth, at least until the country is no longer shut down. Rather, it is meant to cushion the economic blow from the virus-containment policies.’
“That said, it was important for the federal government to act quickly and decisively, Liz Ann says.
“‘Estimates are that the plan will add up to 10 percentage points to real gross domestic product, but that’s likely to be swamped by the expected decline in GDP, at least in Q2,’ Liz Ann says.’
“Investors embraced a more realistic government approach to contain the pandemic. President Donald Trump extended the timeline for social distancing guidelines to April 30, which many believe will reduce economic damage in the long run.”
Meanwhile, back at CNBC, we gathered additional words of wisdom from an old pro.
“‘I think the market has established some type of bottom,’ Tom Lee, head of research at Fundstrat Global Advisors, said on CNBC’s Markets in Turmoil Special on Monday. ‘I don’t know if this is October ’08 here; we still have some wood to chop.’
“Stocks have managed to rally to end the month despite concerning economic data including last week’s record number of jobless claims and Monday’s worse-than-expected manufacturing reading from the Dallas Fed,’ Lee noted.
“‘If we are rallying on bad news, I think that’s a sign that we are probably at a bottom,’ Lee said.”
Now hold on, there, Baba Looey! Today’s market action looked like Mr Market himself is determined to carve out a new bottom, perhaps lower than the most recent one. That’s usually what happens after the first big crash in a sequence. We could be seeing an even worse instant replay of the one we thought we’d begun to escape.
As time permitted, I’ve been busy over the past few days trying to put together my own near-term market outlook. One that’s more useful than what we’re getting from April’s fools. As well as compiling a list of stores offering special senior citizens shopping hours. These are useful things to do when you’re feeling useless. After all, as we all remember from our teenage years, there’s just not a lot to do when your dad – or your state governor – grounds you indefinitely for something you didn’t do.
So why not pull out that dusty crystal ball, gaze into it, and find a few wisps of hopefulness amidst all the stock market carnage? I’m actually doing just that. So fairly soon, I’ll share my pensées with you here, including some potentially profitable sleeper stocks I’ve run into. No recommendations. Just sharing. We don’t do investment advice here. Too many regs to deal with. But giving you some idea about what I’m up to as I try to salvage a few weeks of unmitigated market disaster might just brighten up the joint.
Let’s close with some enigmatic words of wisdom from Tom McClellan’s mom. Tom, of course, built my favorite market direction indicator, unsurprisingly known today as the McClellan Oscillator.
Here’s what Tom’s mom had to say, according to Dave Landry over at Stockcharts.com.
“Some people buy stocks when they have money. Some people sell stocks when they need money. And, others use far more sophisticated methods.”
And with that, I’ll take my leave. I need a drink after another brutal day catching falling knives and jousting (unsuccessfully) with Mr Market.
– Headline image: Cartoon by Garrison. Reproduced with permission and by arrangement with Grrrgraphics.