Outlook for June 2020

May was a mixed month for investors. The growth stocks continued climbing and reaching all time highs while the value stocks continued suffering (as expected), although we saw a bit of a rotation from growth to value in the last few days of May.

Some secular tailwinds have helped the tech-focused growth stocks — such as SaaS, e-commerce, fintech etc. My focus remains on this area as we adjust to the new normal, looking across the chasm of this pandemic.

On the central bank front, the Fed has reduced the daily liquidity to “just” $5B a day. (Can we expect another taper tantrum?) The Fed indicated that negative rates are not a good tool, but as we have seen elsewhere, it may be out of the Fed’s control. The market always dictates what an appropriate yield is & I will be keeping a close eye on this front.

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Outlook for May 2020

Well, that rebound was much faster than expected. The stock market is back in bull mode after some good earnings releases over the past few days. Investors expecting the worst from companies like Alphabet & Facebook noted that the ad market slowdown wasn’t as bad. In addition, the companies were buying back stock providing a floor on the prices. So, the largest companies in the world are holding up the market pretty well.

The central bank panic also seems to have taken care of vol spike we saw in March. Vol is now down to the lows-to-mid-30s…and the US Fed after a massive expansion in balance sheet has started reducing the pace. It will be interesting to see what the next move will be from the central bankers as the world is used to getting a new hit everytime the last round of drugs wear off.

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Outlook for April 2020

What a difference a month makes. March 2020 was complete mayhem as all markets (stock, bond, currency, commodity markets) whipsawed day after day. The equity markets saw one of the fastest bear markets recorded as markets sold off aggressively and seem to have recovered a bit. Suffice to say, there is plenty of confusion on the future of the economy as we are in the midst of a recession, possibly even a depression.

The panic has gripped the central banks as well. Central bankers around the world have cut interest rates aggressively and unleashed QE programs while governments have picked up the pace on fiscal stimulus to complement the monetary stimulus.

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Outlook for March 2020

The long awaited correction is finally here. What a dropdown last week witnessed. After continued strength in the bull market, we find it confusing when market gyrate so much so fast. Looking at the big picture, the move may seem fairly small, but the reality remains that the S&P500 is down 8.47% YTD, and about 12.7% from the peak. Whether this is the dip we should be buying or is this just a tremor before we continue to experience more crashes, remains to be seen.

What is interesting is that Vix has shot up over the month of Feb to 40, and central bankers are already stepping in to calm the markets down showing support and signaling further rate cuts. The bond market is already forcing the Fed’s hand in a sense, by taking the yields further down…close to 1%. Last I checked, the bond market was pricing in 4 rate cuts in 2020!!

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Outlook for February 2020

It’s earnings season and the investing world gets weirder by the day. In this bizzaro world largest companies in the world have their stock gap up 8% (Amazon) or gaps down 8% (Facebook) after earnings release. A move of this type was the domain of microcaps, not a $900B/$600B company. Regardless, the expensive market keeps getting more expensive and the pocket of opportunities keeps shrinking — atleast in the US market.

On the central bank front, the bond market is all but pricing in two rate cuts by the Fed. Liquidity still continues to flood the market which is evident as the money sloshes around in the system.

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