Having written and waited a bit to review what I've written, I am afraid I am coming off more than a bit cynical in my closing remarks... my apologies. I have tried to lighten those remarks up because I do hope and pray that all of this money that is being poured into the economy is getting to the right people and that this pandemic will soon be behind us and all of this ignoring of real economic data is justified. I hope that the stock market's perception of reality is, indeed, reality. But, it is prudent of me (I think) to try to quantify the risk of the stock market's perception not being reality, by pointing out the obvious potential hazards in front of us. I do not know if the market will move a lot lower; I'm only saying we should not get overly enthused about throwing caution to the wind and bet the farm on this being a dependable bull market trend right now. I still believe that the market is running on the hope that a treatment and/or vaccine is immanent and the seemingly unlimited cash being poured into the economy will not end until the economy completely recovers. I hope that this perception by the market does, indeed, become reality. Count me still very skeptical.
I have chatted with a number of my clients this week, including a bunch of brand new clients just coming on-board. Granted, when compared to the all the big (institutional) and small (mom and pop) investors in the stock market, my group of clients is more anecdotal than statistical. But, I have yet to have one person say to me, "Mike, put me all in as soon as you can because this market is going to the moon and I don't want to miss out."
Quite the contrary, to a person, everyone has said something like, "I can't figure this market out, Mike. It just makes no sense to me why the market is booming higher, but I'm glad you are willing to go long if the market insists on booming higher; and, I am ever so grateful that you have stops in place when/if it crashes next."
Yes, I am, reluctantly, bullish right now, ONLY because the current, short-term trend in the market is bullish. The longer-term (200-day moving average) is still on a bearish slope. Common sense tells me that Uncle Sugar will run out of money before the economy (and, by extension, the stock market) gets back on its feet. As an example, the airline industry is saying it will be 2 to 5 years before it gets back to pre-February 24, 2020, numbers. I mean... really... Would you get on a plane right now and fly to a convention? How comfortable would you be to even think about being crammed into an airplane with a bunch of people who may or may not be a COVID-19 carrier, for several hours (or even an hour or two)? At what point in the future will you ever feel safe in a crowd (or airplane) again? I'm thinking not until a vaccine is available to everyone; and that day is a long ways away, I am afraid.
But, who cares, says this stock market... Uncle Sugar is coming to the rescue.
Today, one of Uncle Sugars' biggest sugar suppliers (the FOMC) said, in effect (paraphrased), "We (the FED) have an unlimited amount of sugar and we are spreading it everywhere. Do not worry. More sugar is always available!" So, the market is singing a happy tune and booming higher.
The oil industry is facing a depression, world-wide... so what, says the market; it's about time gasoline got back to less than a dollar a gallon!
The airline manufacturing industry is facing years of losses before getting any hope of recovering... who needs airplanes, says the market, we had plenty before this crisis.
It will be late 2021 (if then) before a vaccine will be available to the masses... that's just a walk-in-the-park, says the market; the cure is just around the corner.
The CDC says this fall could be worse than what we've already gone through with regard to the COVID-19 crises... what a bunch of worrywarts says the market; those people are just fear mongers.
More people are out of work than since the great depression... that's nothing more than a paid (by Uncle Sugar) vacation, says the market; everyone is doing fine!
And, this list could go on and on and on...
I guess that as long as Uncle Sugar has enough sugar to hide all the real economic data, the market (maybe I should rename the stock market as "Sugar-Land")... ok... as long as there is enough sugar to hide all the real issues with regard to the US and global economies, Sugar-Land will be happy. Let's hear it for Sugar-Land and the Sugar-Land express (the FED). And, let's call all of this deficit spending and lending, what it is... it is the sugar (aka Quantitative Easing as far as the eye can see) that will make America Prosperous Again.
But... what if (for reasons that defy logic) that perception is, indeed, reality? What if all that matters is people can get outside and congregate again and we will be right back to pre-February 24, 2020? What if restarting the world's economy is just that simple? Well, then bring on the sugar and let's ride this market higher. But, just in case reality is somewhat different than the Sugar-Land perception, I will remain cautiously bullish and keep stops as tight as I can.