Good Thursday AM,
The action in the equity markets is so erratic these last few days that no one seems to have any explanation on what has happened, let alone what will happen next. Watching CNBC is like a reality TV show these last two weeks. Disagreements, arguing, yelling, insults, etc. If they were broadcasting from a studio instead of social distancing, we might even see an onscreen kiss. Anyway that said, yesterday equity markets took a nose dive, today with no more reason, they’re back up. If you want to get a flavor for the lunacy, just look at Gamestop (or AMC theatres, and others). Businesses that are retail and/or mall based with almost no revenue having their shares rise 1700% in one day. The real professionals (hedge fund managers) know these stocks are worth less (almost worthless) and took short positions but with the consumers buying the prices up, have had to cut their losses and sell. I do not remember another time when the consumer, not the market professional was able to dictate price action. This will come to an end (I suspect soon) with the market falling and the consumer crying… but we will see. Bonds are, of course, a byproduct of all of this. The 10-yr bumped up to 1.06% today as a result of the risk on trades. Mortgage bonds are for the most part flat but they have been underperforming treasuries for the last week, so this is more about balance. The news today was mixed with a miss on GDP expectations counterbalanced by a better than expected Jobless claims report.
Dan Rawitch shared: I suspect at this point we will see a bit more selling and test the bottom of the range. Yesterday there was a good deal of dark pool activity in TLT and I told our members to expect a weak opening. We got one. Hopefully the big money backs off the selling today. I am not convinced that the selling in stocks is over yet, although we are up on the day, I am not sure we stay there. If I am correct, this will spark a deeper correction and send people into bonds as a hedge. I am not predicting a crash, just a MUCH NEEDED cooling in the market. This all feels far too much like 1999 to me right now.
Please remain safe and healthy, make today great!