The S&P 500 has been faltering for the past three sessions and is back near mid-April levels. For now it’s range bound between the upper 200 day moving average and the lower 50dma. Flip a coin to determine if the market will breakout or breakdown from here.
Here’s my assessment of the current situation:
Second Wave of outbreaks as economies reopen
Declining corporate earnings
Depression level unemployment
Points blame at China and increases rhetoric about tariffs, reparations, and economic de-linking.
Investors develop amnesia about recent Stimulus intervention and demand more SPENDING.
What I find interesting is that today’s levels are similar to the peaks seen in Jan 2018, Sep 2018 & Jun 2019. Back then the FEAR was Trade War, Tariffs, Impeachment…ultimately none of that static mattered and the Market went on to set new record highs.
I remain cynically hopeful for another dip, to be used as a long term buying opportunity.
FYI- watch for the next episode of the Wealthsteading Podcast, #312 will be informative & FUN !!!
The Market looked like it might take a dip due to poor economic data. Then today it popped back up when Gilead announced positive results from their COVID-19 treatment trial.
Is this a head fake or a real breakout above the 50 day moving average? It looks solid and the S&P 500 is only 2% away from its 200 day moving average. I’ve been hoping for a secondary pullback so that I could take advantage of another dip. But that opportunity might be fading.
Either way, I think this is still a buyable market. The critical risks are:
2nd wave of infections as the economy
opens back up or during the Fall/Winter flu season.
Unemployment stays high.
Follow-on infections are a real threat, but just like a bad
Hollywood horror movie, the sequel is seldom as frightening as the original.
Elevated levels of unemployment would be detrimental to some sectors of the economy, but remember what’s bad for Main Street, isn’t necessarily harmful for Wall Street. As we saw after the Great Recession, laid off workers generally equate to higher profits for the Fat Cats.
S&P 500 corporate earnings will eventually surpass $170. Zero interest rates will support escalated price per earnings valuations, likely above 20. That puts the future value of the S&P 500 at or above 3400 (170 x 20). More than 15% higher than today’s price.
My math might be wrong, but I continue to see this “crisis” as
a buying opportunity.