Are Saudi Arabia and Russia through with their lover’s spat over oil? The markets seem to think so.
U.S. stock futures rose on Sunday night as Wall Street tried to recover from last week’s decline. Investors tried to shake off the rising tensions between Saudi Arabia and Russia.
Dow Jones Industrial Average futures traded 531 points higher, implying a potential gain of 565 points at Monday’s open. S&P 500 and Nasdaq 100 futures also pointed to a positive Monday morning start.
Stocks are deep in bear-market territory. Concerns over the coronavirus outbreak have virtually shut down the global economy and have dampened corporate profit sentiments. However, some on Wall Street think the market could start to turn a corner soon.
Billionaire investor Bill Ackman, founder of Pershing Square Capital Management, tweeted that he is “beginning to get optimistic.” He said cases in New York, a hot spot for the coronavirus in the U.S., “appear to be peaking” and there are treatments that “appear to help.”
Last month, Ackman called for the U.S. to completely shut down for 30 days as a way to curb the coronavirus outbreak. Concern centered on the economy. “Hell is coming,” Ackman told CNBC’s Halftime Report on March 18.
A billionaire named Bill… wonder how many times has that guy been called “Dollar Bill”?
Well, for everyone’s sake, let’s hope Dollar Bill is right and a market sunrise is on the horizon.
No BS From Bill
On Sunday, St. Louis Federal Reserve President James Bullard confessed that he did not believe the U.S. economy or the job market was in “free fall” due to the coronavirus.
“We’re asking people to stay home to invest in national health, and we’re asking them to use the unemployment insurance program in order to get the transfers they need to be able to pay bills while they’re at home, while they’re not able to work because health authorities are trying to get the virus under control,” Bullard said on CBS’ Face the Nation.
Bullard argued the large increases in jobless claims must be viewed through the lens of helping people who are facing economic hardship.
“In some ways, the uptake on the unemployment insurance program is a good thing because it means you’re getting the transfers to the people that are being disrupted by this health-ordered shutdown,” he said.
Bullard also reminded everyone that the U.S. economy “was actually doing quite well” before the coronavirus pandemic intensified. “There’s nothing wrong with the economy itself,” he said.
Recession, Depression Bear or Quick-Turn Bull Market – How Are Things Different This Time?
The Leuthold Group’s Jim Paulsen expects the economic downturn from the coronavirus pandemic to reach epic proportions.
But he doesn’t believe it’s another Great Depression.
“The depression started in some regards to correct the excesses that built the up over that period, and that has not happened at all today.”
Paulsen, a long time bull, contends the economy was firing on all cylinders before the coronavirus unleaded hell on the United States.
“This recession, the one we’re definitely in, was caused by a completely unique phenomenon. It was the first and only recession by proclamation,” he added. “We just made a public statement that we’re going to hit the off switch on the economy during this virus.”
According to Paulsen, we’re lucky. Today’s massive economic stimulus policies were non-existent about 90 years ago.
His best advice to investors – Stay diversified.
“Probably, the greatest bulk of the damage has been done,” he said. “The worst thing you can do is panic.”
Paulsen also elaborated that he “would use down days here to reduce my exposure to more defensive sectors like the utilities and staples and pharma and REITs – and look at maybe adding a little more cyclicality to the portfolio.”
Some Worry, but Hope is the Choice
Wall Street analysts and investors see a risk that stocks could retest recent lows in the coming days or weeks as they worry about the spread of the virus and its impact on the economy. Although not all – some spot glimmers of light at the end of the tunnel.
Wall Street’s main indices fell more than 1.5% on Friday as the coronavirus abruptly ended a record U.S. job growth streak. The S&P 500 closed at 2,488.65, after rebounding about 13% from its intra-day late-March low, although it is still down more than 26% from its mid-February record high.
Markets have shown some signs of stabilization as investors look for clues about which trajectory to take in coming weeks.
Julian Emanuel at the U.S. broker-dealer BTIG said in a research note on Sunday that if history is any sort of guide, he expects a “retest of the March lows in April, as the public health and economic bad news is likely to reach its parabolic peak.”
Emanuel said that part of what could lead to a bottom for stocks very soon is recognizing that the real reopening date for the economy is not the end of April but rather the end of May.
Emanuel added that stocks often trough “when the headlines are most adverse, hope scarce, and emotions high” and reminded everyone that as investors, “we want to be ready for that time, and we think it is coming in April.”
Emanuel also pointed to one “uncommon phenomenon indicative of systemic hedging,” saying the S&P 500 VIX, which measures volatility, is currently above the Nasdaq 100 VIX, which is “usually reserved for times of market stress.”