When Corona Peaks, Expect V Shaped Rally, Really?
We have gathered some comments from Mainstream Media about the prospects of the stock market as the pandemic worsens globally.
-This may be one of the most exceptional opportunities to invest in this decade with hindsight. Dubravko Lakos-Bujas, chief U.S. equity strategist at JPMorgan, expects the S&P 500 to reach 3,400 in early 2021. This is a once-in-a-generation buying opportunity. The time to buy is when there is blood in the streets, even if it is your own. There would be a one-time hit to GDP in the first quarter due to the impact of the coronavirus, followed by a stronger, V-shaped recovery.-
Many investors are still hopeful that this selloff will just be like all the others we’ve seen with the Fed ready to come to the rescue. The sentiment goes, once the virus is contained, markets will be back to normal and the 11 year old bull market will be back on. The lowered interest rates will kick in coupled with more stock buybacks, and with additional QE as an insurance, why would any investor exit this market?
Well, we have been warning to our subscribers all last year that stock market gains were without actual earnings supporting it, It’s was all about the projected gains and the stock buybacks, it was the multiple expansion they unleashed on the markets, it was the dubious increase in earnings per share based on earnings applied to smaller float of company shares as the buybacks were reducing the stock float. The notion of creating business cycles driven by debt and cheap money and the ramification of kicking the can down the road will ignite an economic collapse or even greater, a ‘Depression’. But the Fed just masks them with ever more debt and ever more cheap money and hope for the best. This dot.com type of behavior of getting me in at any price has finally come home to roost. The 11 year bull market courtesy of cheap and easy money is NO MORE, it came to a screeching halt. Many think the selloff is due purely to CoronaVirus but the virus was only the ignition not the cause of the carnage we are witnessing. We knew the Fed’s reckless policy could not last forever as the Elliott Wave 5th larger cycle degree waves along with 5th lesser degree waves have been fully accounted for and it was warning all last year that we are at the tipping point. Yes, we were early on the call but we eventually got the call right. Listen, we should not blame the Fed for the coronavirus but what we should blame them for is the asset bubble they have created along with a $1 trillion deficit in 2020 before the Corona and possibly adding another $2-$4 trillion in deficit with anticipated fiscal stimulus. Most economists have been warning about the unsustainable expansion of US debt way before this global pandemic and now with this global crisis we are in uncharted territory.
Last week the markets behaved like a vicious bear market. The limit ups and limit downs, furious rallies followed by vicious selloffs. All indices erased 3 years of gains in a matter of a few weeks where for ‘junk’ rated companies, the sell-off has been the most severe. Central banks are throwing the kitchen sink at the mayhem but so far to no avail. Now, we are putting our last ‘HOPE” on that big fiscal stimulus package Trump has under his sleeves. Will this get us out from the brink of a Recession? And get that V shaped rally everybody is talking about? Our Elliott Wave count already knows how this will unfold, it’s already labeled the path the market will take and we don’t think it’s a Recession, it’s more like a Depression.