After many nights of watching CNBC interviews, days of reading analyst reports and wasted time on social media I have somehow heard almost everyone’s opinions on the world. I have come to the conclusion that there are generally three main categories that investors sit within based on their views of the future and how the world plays out.
The first category is the “Millennial Trader”. This collection of traders are all over social media flaunting there one lot victories trading CFDs and believe that the world is ending. They were born in the world of believing in cryptocurrencies because of an eventual collapse in the financial system and that bitcoin will be worth more than their children. That inherent view predicates the demise of companies and social order and as a result Armageddon is upon us.
The second category is the “Retest of the Lows” crowd. This is probably 75% of the market. Almost everything I read or hear is all about buying opportunities emerging once a retest of the lows is seen. This group is awaiting better buying opportunities and are glued to the “corona stats” looking for some improvement in a sea of bad news that will give them comfort in buying and until then markets will head lower.
The third category is the “V-shaped Recovery” group. This is the smallest collection of investors who believe the lows are in and that for key stocks the time to buy was over a week ago and as each day passes the risk of missing out on true “bargains” increases exponentially. I am a member of this group.
While there will be companies and sectors to avoid for quite some time, others are already on the charge higher. Markets rarely give investors a right time to pull the trigger and for anything of quality like some that I mentioned last week, investors are already left chasing them higher. Will another gift be bestowed upon us? I am not so sure. In fact I am willing to bet on that they won’t because even in the face of bad news, some stocks continue to surge.
Tonight we have US employment data and we all know it will be bad. Just like jobless claims were last night when 6.6 million Americans filed for unemployment benefits vs 3.1 million expected. However, markets still rallied and took that number in its stride because the range of expectations is so wide. Jobless claims expectations ranged from 1 million to 10 million. So really we are all guessing and when huge number of unemployment reaching 30% are already out there, markets will de-sensitize and look through the cycle to the other side.
By the time the COVID-19 news is good, great equity market opportunities will have passed.
Tonight will be interesting to see how equity markets react to the shocking employment number that will certainly be released. My big support for the S&P 500 is across 2400/2350. Provided it can stay above that I am in the third category. If not, I might have to join category 2, but no matter what I refuse to be a millennial!
