What professional career risk looks like

This is a market that defines professional career and business risk. Should investors adopt a momentum approach, or maintain caution in the face of valuation and macro risk? The stock market has recovered from the COVID-19 crash. The NASDAQ has made a fresh all-time high, and the SPX was briefly positive for 2020. Price momentum...

What would a Biden presidency look like?

Joe Biden has officially clinched the Democratic nomination for president, and his odds of winning the Presidency in November have been steadily rising, and he is now at 54% on PredictIt. For the uninitiated, the contract pays off at $1.00 if a candidate wins, so buying the Biden contract at $0.54 implies a 54% of...

May Jobs Report: Back from furlough

I don't usually offer instant reactions to economic news, but the May Jobs Report was a shocker. Non-Farm Payroll gained 2.5 million jobs, compared to an expected loss of -8 million. The Diffusion Index bounced back strongly, indicating breadth in job gains.     This was a positive and highly constructive report for the economy....

Back to basics: Is this market overvalued?

There has been a recent continuing controversy about the usefulness of forward P/E as a valuation tool in the current recessionary environment. On one hand, past bear markets have typically bottomed out at a forward P/E ratio of 10, with a low of 7 (1982) and a high of 14 (2002). FactSet's reported market rating...

What gold tells us about confidence

How badly has the pandemic affected the global economy? The United Nations Development Programme (UNDP) has some answers in a recent report. It expects global human development to decline for the first time this year, and EM economies will bear the brunt of the impact. The International Labour Organization (ILO) estimates that up to half...

What’s the next market narrative?

This crisis has so far gone through two phases of market psychology. The first phase was panic, as it became apparent that COVID-19 had become a global pandemic, and economies around the world were shutting down. Stock prices rebounded during the hope phase, supported by a flood of fiscal and monetary stimulus, and the hope...

The recovery scenario

The San Francisco Fed recently created a Daily News Sentiment Index, which is derived from 16 major newspapers. In the space of a few weeks, market psychology has turned from "the market is going to retest the March lows" to "the Fed is supporting prices, valuation doesn't matter, the economy is recovering, - Buy". Regular...

The 4 reasons why the market hasn’t seen its final low

Stock prices raced upwards last week on the news that the COVID-19 outbreak is improving in New York and other parts of the US, and on the news that the Fed unveiled another $2.3 trillion bazooka of liquidity. Despite these positives, I am not convinced that this bear market has seen its lows yet. This...

Handicapping the odds of a V-shaped recovery

Last week's stock market rally appears to be based on the hopes of a V-shaped economic recovery, powered by the combination of all-in monetary stimulus, and fiscal stimulus, as evidenced by a $2 trillion bill passed in Congress. Street consensus is now a V-shaped rebound, with a trough in Q2. This Goldman Sachs forecast is...

The 9/11 market template

In my last post (see 2020 bounce = 1987, or 1929), I had been searching for a template for the current bear market. I had suggested in the past that the roots of this bear has thematic similarities to 2008 (see A Lehman Crisis of a different sort). Today, health authorities are urging the use...

My recession call explained

In the past week, I have had several discussions with investors about my recession call (see OK, I'm calling it). Since the publication of that note, Bloomberg Economics' US recession probability estimate spiked recently up to 55%. The odds of a 2020 recession at betting sites are even higher. To reiterate, I would like to...