Thursday, March 12, 2020

Trump's Rally, a hot air bubble in the middle of the Perfect Storm

First and foremost this is not about politics, but about finding numbers and facts. The recent meltdown has wiped off $6T in just four weeks, if we remember what happened in 2008, back then the Dow Jones lost -7,700 points from top to bottom in 17 months, and wiped off $6.9T in Market value. The two bar patterns in the chart show the comparison between Trump's meltdown and the 2008 meltdown. What we have just witnessed is a fast motion video of the 2008 meltdown.

The stock market is almost at the levels it had at the end of the Obama administration. Usually the presidents have left with a positive market, except for Bush, Cater and Nixon.

Again, this is not about politics but about numbers and facts. The following is a table showing the stock market performance with the latest presidents since Nixon Ordered by performance.

Clinton : 228.9%
Obama : 148.3%
Reagan 147.3%
Bush Sr. : 41.3%
Ford : 40.6%
Trump : 6.7%
Carter : -0.7%
Bush Jr : -26.5
Nixon : -28.3%

The best performers were during the Clinton, Obama and Reagan administrations, and the worst were during Nixon and Bush Jr.


I will go with the old saying "The Market Is Always Right". The market has talked and the market says the way the Corona virus and the overall conditions are not suitable to keep the lines and it decided to cash out. Will it come back? or will it keep on falling? The technical indicators are showing areas below the trend support, which usually means there could be a recovery rally after a short covering and short term swing traders. Afterwards depending on what the market assesses it will either decide to test the all time high, or it will fail resistance and we'll technically be in a Bear Market.

There have been a series of unfortunate events, the trade wars hit hard the US Steel, Aluminum , and agriculture sectors. There has been a slow down in the Oil market, which signals a decline at the top of the bull market and it's a market rotation since energy is not in high demand. Putin's declaration of war against "shallow american oil industries" has been another important ingredient in this perfect storm and the ban on airline travels put a nail in the coffin here. The bond yield curve has been shifting for a while and this signals a migration from stocks into safe havens. The corona virus was the triggering element that spooked investors, and not by the virus itself, but by the way this emergency has been managed. This was neglected at first and there was not a proactive response from the administration, what we see now it's a problem that has overwhelmed the response capabilities and has started to put several industries to a halt.

The lack of clarity, transparency and honesty are another problem. Trump has been belittling the crisis, and he hasn't delivered the adequate response to it. Markets look for clarity and accuracy, but unfortunately Trump has a bad relationship with the truth, after over 16,000 misleading or false statements in his administration, his credibility is something that doesn't help at all at this time when truth and clarity are mostly needed. You may be or not a Trump fan, but if you're reading this, then you are interested in the stock market, so the actions taken by this administration which will determine if there will be a recovery or if this administration who has been boasting the stock market as its main indicator of success will deliver not only a failed market but also an economic recession.

The definition of a Bear market is a market that has lost +20% from the highest level, which is defined as the bear territory, but not necessarily a bear market. A bear market needs to proof a series of lower lows and lower highs. The next high will define this. I am bullish , not for the long term, but for the leg on the upside after the slingshot effect due to the short squeeze as soon as this market finds a support level , that's why my rating is bullish . When this leg will be exhausted I will reevaluate my rating.

Good Luck and Safe Trading !

No comments:

Post a Comment