04-08-2020: Full Steam Ahead... Right?

No... that is NOT right, but never-mind... the market is moving higher and higher; not enough to change the downward bear trend of the 200 dma of the market, mind you... but it is ripping higher over the past two weeks and totally based on the 'fact' that there is "light at the end of the tunnel."

We have more new clients coming on board right now than we have ever had in history. It is truly phenomenal. That means I get to speak with these folks and get to know them for the first time. Some of the stories I am hearing are incredible with regard to how their portfolios have been decimated with the typical buy-and-hold approach. But, sometimes (as in the case this morning) I get a totally different kind of story; one that certainly makes a lot of sense to me and it ties into my first paragraph, above.

My new client is a medical doctor and is on the front lines of this COVID-19 pandemic. He wanted to know my position on the market and we began to compare notes in that regard. Here is the gist of that conversation...

The light at the end of the tunnel is NOT when the virus is no longer a threat to individuals. No, the light at the end of the tunnel is when the hospitals are no longer likely to be overwhelmed. The curve of hospitalizations has been lowered, but the total number of people under the curve (regardless of how much it has been lowered) has not changed. Those people are still there, sheltered-in-place and adhering (mostly) to social distancing, but they are still there nonetheless.

All the flattening of the curve did was prolong the infection rate and reduce the overwhelming need for hospitalization... it has done nothing to eliminate or reduce the potential for infection. It ONLY lowered how fast people would get infected; not stop or keep people from getting infected. What has worked is sheltering-in-place and social distancing... and the government's goal of keeping hospitals from getting overwhelmed.

So... if the above is true (and perhaps it is not), then there is no 'all clear' any time soon. At some point, we will have to deal with this as we do with any potential viral infection and while this one does seem to be a much more dangerous flu, at some point we will have to leave our protected homes and deal with getting infected... or wait for a therapeutic treatment and/or vaccine (which may never come).

This means we must, at some point soon, get back to our 'normal' lives. If we don't, our economy will move from recession to depression; and, none of us want that.

In concluding our conversation, here is how I explained our investment strategy:

1) The current bullish trend is likely very short lived. As such, I am only slightly invested in bullish holdings in Tactical Growth and ULTRA-MAX. All other strategies are 100% cash. What could change my mind about this is if the 200-day moving average of the market was to reverse from a bear trend to a bull trend; not something I expect to see happen any time soon.

2) I expect Q1 earnings' reports to be bad and Q2 earnings' reports to be horrifically bad.

3) People will not be flocking back to work any time soon. If they do, it will be in far less open and interactive conditions.

4) The market will come to realize that the light at the end of the tunnel is not the all-clear signal, but simply the end of the hospital crises phase, with many phases of this virus yet to overcome.

5) When the market begins to deal with earnings instead of hope, share prices will likely begin to fall and fall hard. It is here that I plan to move back into inverse ETFs.

6) This will likely be an L-shaped market condition. The bottom of the 'L' is nowhere in sight at this writing. At the end of the 'L', the recovery will likely not be straight up.

7) In the meantime, we will invest according to the current trend of the market, which for right now, is extremely bullish. But, our investments will remain small in this bear-market rally.

As you know, I try very hard to not proffer my 'guesses' about the future market, but my new client wanted to know my thoughts to see if he agreed with me; and he wholeheartedly did. Of course, I could be wrong. That is why I invest according to the data we have and not the opinions (mine or others) about what may transpire in the future.

Stay safe. Stay well. Stay optimistic!

Turner Capital

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