Someone in the markets is wrong, we need more trillions

8 เม.ย. 2020

Stock markets yesterday stormed new local peaks. The latest data from Spain and Italy show that, apparently, the peak of the epidemic in the countries has been passed: the number of new infections and deaths shows a steady downward trend. China in turn shows 0 (zero) new cases of infections. And April 7 is the end date of the lockdown in Wuhan. As the result markets decide the worst is behind and ahead of us the brightest and most beautiful future.

It is somewhat strange that in this general fun markets quickly forgot that the largest economy in the world so far is only approaching the peak of the epidemic with unobvious consequences both for the country as a whole and for its economy. Everyone somehow ignored the news that Japan (the third largest economy in the world) introduced a state of emergency in a number of prefectures, including Tokyo (an interesting fact is that Tokyo’s economy is 11th in the world in size, and not among cities, but among countries (! )). For some reason, everyone forgot about that the US labor market has turned into deppest depression only during a couple of weeks.

Here is quote from the former head of the Fed, Jannette Yellen: “the economy is in a“ completely shocking ”recession, which is not yet reflected in current data. If it were, the unemployment rate would probably reach 13%, while the overall economic downturn would be about 30%. ”
Experts all as one (Morgan Stanley, Goldman Sachs, Bank of America, etc.) talk about a 30+% drop in US GDP in the second quarter, but US stock indices are up 10% in just a couple of days.

At the same time gold adds 50-60 dollars a day, closely approaching to 1700.

Obviously, someone on the market is wrong. We are trying to be unbiased. Perhaps we are mistaken. But so far, the facts, statistics and experts show that the stock markets are more likely to be mistaken. That is why, despite the fact that we continue to go against the market, we recommend to sell in the stock markets. The main thing is not to forget about stop-losses.

Meanwhile, confirming our words that the problems have not yet been resolved, Japan accepts $ 1 trillion (!) of assistance to the economy. Plus, information has arrived that the US wants to allocate an additional trillion dollars to help the economy. If everything is so good and great - why do they do that?

And a few words about the oil market. Russia confirmed participation in the OPEC+ meeting on Thursday. But the main attention is now focused on the United States - whether they will participate in the agreement. This condition was proclaimed by Saudi Arabia and Russia. So far, Trump noted that no one asked him to participate in the meeting and, in general, market mechanisms themselves will solve the situation. That is, US manufacturers without external intervention will reduce production due to low prices. Well, the intrigue is twisting. But for now, without full clarity, we will continue to sell oil within the day until Thursday.