Will S&P 500 Retest Recent Low By End of April

[buffetteer1984]

Cramer who keeps in touch with David Tepper said on squawk box that Tepper has gotten much more bullish on the markets since claiming the markets was over valued mid may.  Sounds like he's trying to play some catch up from being too under invested.

[mattee2264]

 

agree physdude. It isn't difficult to see the market rising a further 10% with lots of potential catalysts such as more fiscal or monetary easing, a faster than expected path towards a full re-opening of the economy, a near eradication of the virus by the end of the summer, and promising vaccine trial results.

But it is becoming very difficult to imagine what could sink the market 30+%.

 

I don't think even a second wave would do it. I think the fact that we are more prepared and know a lot more about the virus should allow governments to implement much shorter and much more partial lockdowns and it may even be that social distancing/mask wearing may be enough. Scientists are putting a lot of effort into tracking the virus so it should be easier to nip it in the bud before it spreads like wildfire. And even if the economic data is a lot worse than expected and takes a lot longer than expected to improve I'd expect this would be fully offset by more aggressive fiscal and monetary easing.

[Jurgis]

 

agree physdude. It isn't difficult to see the market rising a further 10% with lots of potential catalysts such as more fiscal or monetary easing, a faster than expected path towards a full re-opening of the economy, a near eradication of the virus by the end of the summer, and promising vaccine trial results.

But it is becoming very difficult to imagine what could sink the market 30+%.

 

I don't think even a second wave would do it. I think the fact that we are more prepared and know a lot more about the virus should allow governments to implement much shorter and much more partial lockdowns and it may even be that social distancing/mask wearing may be enough. Scientists are putting a lot of effort into tracking the virus so it should be easier to nip it in the bud before it spreads like wildfire. And even if the economic data is a lot worse than expected and takes a lot longer than expected to improve I'd expect this would be fully offset by more aggressive fiscal and monetary easing.

 

Market cannot drop! Everybody buy, buy, BUY!

[jmp8822]

 

agree physdude. It isn't difficult to see the market rising a further 10% with lots of potential catalysts such as more fiscal or monetary easing, a faster than expected path towards a full re-opening of the economy, a near eradication of the virus by the end of the summer, and promising vaccine trial results.

But it is becoming very difficult to imagine what could sink the market 30+%.

 

I don't think even a second wave would do it. I think the fact that we are more prepared and know a lot more about the virus should allow governments to implement much shorter and much more partial lockdowns and it may even be that social distancing/mask wearing may be enough. Scientists are putting a lot of effort into tracking the virus so it should be easier to nip it in the bud before it spreads like wildfire. And even if the economic data is a lot worse than expected and takes a lot longer than expected to improve I'd expect this would be fully offset by more aggressive fiscal and monetary easing.

 

Market cannot drop! Everybody buy, buy, BUY!

 

LOL

[AzCactus]

 

agree physdude. It isn't difficult to see the market rising a further 10% with lots of potential catalysts such as more fiscal or monetary easing, a faster than expected path towards a full re-opening of the economy, a near eradication of the virus by the end of the summer, and promising vaccine trial results.

But it is becoming very difficult to imagine what could sink the market 30+%.

 

I don't think even a second wave would do it. I think the fact that we are more prepared and know a lot more about the virus should allow governments to implement much shorter and much more partial lockdowns and it may even be that social distancing/mask wearing may be enough. Scientists are putting a lot of effort into tracking the virus so it should be easier to nip it in the bud before it spreads like wildfire. And even if the economic data is a lot worse than expected and takes a lot longer than expected to improve I'd expect this would be fully offset by more aggressive fiscal and monetary easing.

 

Market cannot drop! Everybody buy, buy, BUY!

 

Maybe I misread but did he actually say the market couldn't drop or he doesn't see it dropping 30%?  I think there's a bit of a distinction there. 

[Jurgis]

 

agree physdude. It isn't difficult to see the market rising a further 10% with lots of potential catalysts such as more fiscal or monetary easing, a faster than expected path towards a full re-opening of the economy, a near eradication of the virus by the end of the summer, and promising vaccine trial results.

But it is becoming very difficult to imagine what could sink the market 30+%.

 

I don't think even a second wave would do it. I think the fact that we are more prepared and know a lot more about the virus should allow governments to implement much shorter and much more partial lockdowns and it may even be that social distancing/mask wearing may be enough. Scientists are putting a lot of effort into tracking the virus so it should be easier to nip it in the bud before it spreads like wildfire. And even if the economic data is a lot worse than expected and takes a lot longer than expected to improve I'd expect this would be fully offset by more aggressive fiscal and monetary easing.

 

Market cannot drop! Everybody buy, buy, BUY!

 

Maybe I misread but did he actually say the market couldn't drop or he doesn't see it dropping 30%?  I think there's a bit of a distinction there.

 

Thanks for correction. For a moment there I thought that I could buy everything in sight. Now you destroyed my enthusiasm and I am lost again. Gonna go to RobinHood message boards to recover.

[Mephistopheles]

This has got to be one of the most hated rallies ever. I'm sure many on this board as well as some of the greats all have varying amounts of cash on the sidelines. The best 50 days in a row ever I hear?

 

So many investors are sick to their stomach seeing prices indiscriminately rise.

 

All of this makes me think that the rally will continue, until people throw in the towel and can't take missing out anymore and all that cash starts coming off the sidelines.

 

Disclosure - I am at like 30% cash.

[wescobrk]

Did anyone bull calls in late March and sell some of them at a double and if they held would be worth a 10 bagger today? Is it irrational to have some regrets for having a double in a 2-3 week timeframe?

[Jurgis]

Well, at least Buffett sold at bottom too.

 

 

 

 

 

Disclosure: Total holdings close to ATH. 25%+ in cash and bonds.

[Mephistopheles]

Did anyone bull calls in late March and sell some of them at a double and if they held would be worth a 10 bagger today? Is it irrational to have some regrets for having a double in a 2-3 week timeframe?

 

Not as good as the scenario you laid out, but I loaded up on calls for WFC while it dropped to 22, and sold many of them for quick 50% returns while I could have made a lot more :(

[jmp8822]

Where does everyone think this is headed? 10 or 20-percent higher with unemployment in the teens? Shiller PE at all time high with unemployment over 10 percent? It is hard to comprehend what is happening, but of course the saying goes: don't fight the Fed.

[Viking]

It certainly is interesting how relentless the move upwards has been. Perhaps we are seeing a shift to stocks from all other asset classes (cash, bonds, real estate) as investors chase return. Add in an large influx of new retail investors and the momentum crowd. As we have learned, in the short term anything is possible :-) Perhaps we are in the early innings of a new equity bubble forming.

 

Lots of unknowns right now. Impact of Fed/central bank actions? Strength of current economy (domestic and global)? Path of virus in fall? US election?

 

Bottom line investors are being given a gift to rebalance portfolios.

 

Over the medium term earnings will matter. And this will be determined by the level of economic activity.

 

PS: i see that the most hated sectors are now rallying (banks) so perhaps we are at the later stages of the rally. Or do we see a rotation back into GOOG and Facebook and start the process all over again :-)

[TwoCitiesCapital]

Where does everyone think this is headed? 10 or 20-percent higher with unemployment in the teens? Shiller PE at all time high with unemployment over 10 percent? It is hard to comprehend what is happening, but of course the saying goes: don't fight the Fed.

 

Honestly, I don't think it's Fed we're fighting. It's the Treasury.

 

I've been thinking through the last couple weeks how this could be possible or make sense. The only thing I've come to is the market hasn't felt the impact yet.

 

Yes we might have 20-25 million sustainably unemployed for the medium term which is ENORMOUS (3x 2008/2009). But, 70% of those people are currently making MORE with the exceptional unemployment benefits. In other words, the economy isn't feeling that 20 million have been laid off - it's feeling that 15 million people have been given raises. I wouldn't expect discretionary spending to be Bonanazas b/c they're still unemployed, but it probably did prevent a huge number of people from cutting back on purchases which is still a net positive...but it's temporary one.

 

In addition to that, the $1,200 checks that went out to a massive portion of the population helps too...but is also temporary.

 

So right now the economy is feeling pretty good and the biggest issues that have actually been felt were the supply chain disruptions which are quickly being rectified. The only other "pain" in the economy at this time is rents that are being deferred.

 

I think this continues on untill the economy is allowed to feel pain - which will be when the exceptional unemployment benefits and that's scheduled to be next month.

[Spekulatius]

Where does everyone think this is headed? 10 or 20-percent higher with unemployment in the teens? Shiller PE at all time high with unemployment over 10 percent? It is hard to comprehend what is happening, but of course the saying goes: don't fight the Fed.

 

Honestly, I don't think it's Fed we're fighting. It's the Treasury.

 

I've been thinking through the last couple weeks how this could be possible or make sense. The only thing I've come to is the market hasn't felt the impact yet.

 

Yes we might have 20-25 million sustainably unemployed for the medium term which is ENORMOUS (3x 2008/2009). But, 70% of those people are currently making MORE with the exceptional unemployment benefits. In other words, the economy isn't feeling that 20 million have been laid off - it's feeling that 15 million people have been given raises. I wouldn't expect discretionary spending to be Bonanazas b/c they're still unemployed, but it probably did prevent a huge number of people from cutting back on purchases which is still a net positive...but it's temporary one.

 

In addition to that, the $1,200 checks that went out to a massive portion of the population helps too...but is also temporary.

 

So right now the economy is feeling pretty good and the biggest issues that have actually been felt were the supply chain disruptions which are quickly being rectified. The only other "pain" in the economy at this time is rents that are being deferred.

 

I think this continues on untill the economy is allowed to feel pain - which will be when the exceptional unemployment benefits and that's scheduled to be next month.

 

Yes, I think it is correct that a large part of the Population got essentially a momentary pay raise, especially lower income folks who got laid off.

 

I do think that the latest development reduce the chance if a large follow up stimulus, especially the in employment boost of $600/ week disincentivized many to go back to work. It really needs to go or at least fat drastically cut.

[Jurgis]

I somewhat agree with TwoCitiesCapital thoughts.

 

There is also the following:

 

FANMG (A is Amazon, not Apple) are doing good to great and they dominate the indexes. So they keep rising at least somewhat.

 

Covid-affected companies are not doing great, but they also fell much more than FANMG in March. So arguably they were cheap and may still be somewhat cheap (assuming V recovery).

 

So it might be somewhat rational that both parts of the market (FANMG + any Covid-positively-affected companies and cheap(er) Covid-negatively-affected companies) are going up and carrying indexes to ATH.

 

Plus low rates, plus easy money (refi, loans), plus stealth tax cuts (yeah that part where companies get back taxes), plus unemployment stimulus, plus free money ($1200 checks).

 

What's not to like?

 

Counterpoint is that valuations for a lot of companies are (very) high. But valuations by themselves may not be enough to precipitate drop/crash/etc.

 

We'll see.

[Spekulatius]

We used to have macro trader, but that doesn’t really work better than “value investing”. What works now is “meta trading” and some younger folks are better at it than us old stooges.

 

One just has to make sure you can grab a seat when the music stops.

[opihiman2]

I've been on the sidelines this whole rally, and honestly, I don't even care.  I'm up big time on my recession play: going 100% long 30 yr treasuries.  The stock market, though has been a bit bewildering and fun as hell to watch.  I voted way back that I had no idea where this would go, because the biggest thing I've learned over the past 10 years is:

 

1) US equity markets are addicted to QE

2) The Fed has destroyed any sense of price discovery

 

Because of that, I was like, shrug, who knows where this is going.  But coming out of this, it's pretty clear.  The Fed will now have to continually back stop credit markets and thus equity markets.  J Powell did not like what he saw in the repo markets.  People thought he gave in to the bear market decline of 2018, but from what I've read, it was the repo market that caused him to get off his ass.  Even though he has said publicly that it's not the Fed's job to back stop the stock market and that QT was on auto pilot, he's made it crystal clear that won't ever happen again.  I've recently heard that after GFC, there was talk at the Dallas Fed of back stopping pension funds.  It's getting absurd, and I think this will all end really badly someday. 

 

The one thing I'm looking for is when the Treasury starts to flood the markets with new issuance to fund the massive deficits and stimulus spending.  Either the Fed starts ramping up their purchases again to basically monetize all of this along with other open market operations to drive down rates and the dollar -- which has been happening dramatically this past month.  Dollar index is down 5%. 

 

[SHDL]

Small investors are apparently piling into bullish options like never before:

 

https://www.bloomberg.com/news/articles/2020-05-19/sundial-says-extreme-options-sentiment-is-awful-omen-for-stocks

 

Updated stats:

 

Pretty impressive spike in call buying. It should be interesting to see what happens when all those options start expiring.

[opihiman2]

Small investors are apparently piling into bullish options like never before:

 

https://www.bloomberg.com/news/articles/2020-05-19/sundial-says-extreme-options-sentiment-is-awful-omen-for-stocks

 

Updated stats:

 

Pretty impressive spike in call buying. It should be interesting to see what happens when all those options start expiring.

 

That was a very good Twitter thread.  Much thanks for posting that.

[mattee2264]

The low interest rates for longer guidance coming from the Fed seems to be the most compelling argument for high valuations even in the face of a slow and less than complete recovery in the economy.

 

I think the biggest risk is that the economy overheats as fiscal stimulus, pent up demand and a lack of productive capacity collide and inflation starts to rear its head. That is probably the only thing that would force the Fed's hand. So while a V shaped recovery may initially be bullish and support a pre-election boom the aftermath could be quite messy. But in the meantime who knows how high markets could go?

[SHDL]

I think the biggest risk is that the economy overheats as fiscal stimulus, pent up demand and a lack of productive capacity collide and inflation starts to rear its head. That is probably the only thing that would force the Fed's hand. So while a V shaped recovery may initially be bullish and support a pre-election boom the aftermath could be quite messy.

 

That is a plausible end game and my guess is that the bond market will gradually start pricing it in before the Fed actually starts tightening. Long term Treasury yields are already starting to creep up a little... I would keep an eye on how they evolve from here.

[thepupil]

All you need to know

 

[buffetteer1984]

Those heeding the advice of drunkenmiller will probably want to know that he's gone bullish on the markets and said on cnbc this morning he was too cautious during the whole rally.  Also noted he could change his mind at anytime.

[IceCreamMan]

Those heeding the advice of drunkenmiller will probably want to know that he's gone bullish on the markets and said on cnbc this morning he was too cautious during the whole rally.  Also noted he could change his mind at anytime.

 

I guess if you're going to buy because prices have gone up, better to do it sooner rather than later.

 

Is it time to take bets on who will be next to capitulate? No betting on yourself.

[TwoCitiesCapital]

Those heeding the advice of drunkenmiller will probably want to know that he's gone bullish on the markets and said on cnbc this morning he was too cautious during the whole rally.  Also noted he could change his mind at anytime.

 

I guess if you're going to buy because prices have gone up, better to do it sooner rather than later.

 

Is it time to take bets on who will be next to capitulate? No betting on yourself.

 

It is shocking the about face they're making despite continued support for a "not-so-V-shaped" recovery that is prevalent in the data.

 

That said, easy come and easy go. Nothing will stop these guys from turning around the opposite way when the market falls 10-15% with the fundamentals being exactly the same. The job is make money for clients - if they can do that with an eye towards the fundamentals and occasional flip-flop, then good for them. But I'm just sticking to the outlook and see nothing close to support for the current prices.