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No Man's Land - Hope, Reality, Unknowns and X Factors

Its Thursday, Aprill 30th and there are reasons for optimism. For example, the preliminary indications for Gilead"s Remdesevir and Oxford University's "Vaccine" development program look promising. There are however also reasons for pessimism such as unemployment numbers topping 30 million (exceeding numbers at the peak of the great depression), the possibility of renewed trade friction with China and a more cautious consumer in the immediate months ahead.

The rising tide of corporate debt over the last few years and more than 1,000 credit downgrades since January 2020 is also cause for concern. The COVID-19 economic shock is only going to exacerbate the issues in companies with marginal quality debt ratings. It is realistic to expect a wave of banruptcies. The Federal Reserve will be avoiding companies at the lower end of the ratings spectrum.

It is unrealistic to expect a robust return of the economy as most states adopt a gradual "phased" approach to re-opening their economies along with maintaining social distancing and strict hygiene standards. This will inevitably slow "commerce" and "demand" as we head into May and the summer 3rd quarter.

It is also a close to 100% guarrantee that we will experience a resurgence of the coronavirus in the fall alongside the flu. Even with effective anti-viral treatments on the market, there will no doubt be worries that the hospital systems could get over-whelmed. As a result it is possible that we could be subjected to new shelter-in-place orders to prevent that from happening.

With all the unknowns ahead, caution is wise until some of these become less "unknown".

We are effectively in "NO MAN'S" land. If it were not for the Government and Federal Reserve's fiscal intervention and promise to cotnonuing doing so if warranted, the markets would look very different today. This will contonue to provide a downside backstop for the markets.

And finally, there are the "x" factors, the things we cannot foresee that might play a role in influencing and shaping events ahead. Regardless, we expect more turbulence ahead.

You can see what some prominent investors are thinking about the current market in the article links below:

 

Carl Icahn sees various short and long-term opportunities ahead

Stifel's bannister sais we have hit a ceiling in the market in the short term

Bill Gates Outlook for a Vaccine for COVID-19

 

A Buffet of Hope & Realism
Why Promise & Proof Are Binary Events in the World...

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