The fear-mongering by the financial media has had an adverse effect on the US and international equity markets. Most are down double-digits, while the safety trade in the US dollar and gold retreat from recent highs. Bonds are at highs, propelling the 10-year yield to an all-time low in the process.
The housing market reflects these lower yields.
New Home Starts
My wife was asking me about a new home recently, so this chart was created for her in order to visually illustrate where we’ve been and where we seem to be going.
We bought our current residence literally days before the market collapsed. That’s where the levity came into play. She wasn’t amused.
The S&P 500 (shaded blue), was included as a helpful reference. Note, you have to squint to see 1987. Major points to provide context.
- The markets always recover
- The unemployment rate is the lowest its been since the ’60s
- More people working equates to more discretionary income
- My peak earnings years as an architect were 1986 – 2020
- I traded all those years post-1987
- Earnings multiples expanded in several waves
- We graduated, bought assets got married and had kids
- My oldest daughter is repeating the process
- She graduated, got married and moved to Virginia
- Multiple expansion begins anew
Millennials are starting to buy new homes and new cars as they begin their careers. The waves of multiple expansion will mirror, to some extent, those of my “peak earnings” years.
The point I’m trying to make is, eventually the markets found buyers. The world did not come to an end, despite the constant hyperbole from the financial media. Yes, this is serious and so were previous outbreaks.
“Around 200,000 people in the “United States” are hospitalized each year because of the flu, and of these people, about 36,000 die. The flu is most serious for the elderly, the very young, or people who have a weakened immune system”
While we can debate the severity of the current coronavirus crisis and how it differs from past pandemics, it helps to keep life in context.
Reflecting on my personal experiences helps put fear in context:
- In a war zone at 17 years old – Vietnam – that was fear
- 1987 stock market crash (-29%) in one trading day
- 2000 dotcom collapse – drawdown (-50%)
- 2007 financial crisis – drawdown (-57%)
With market conditions severely oversold and at extremes, we are watching credit spreads. FRED data illustrates the current yield spreads. Peaks equate to market selloffs. We wait on the FED to react.
There will always be a catalyst for market drawdowns. Fear will always peak and life will return to normal. We believe we are at a peak in fear and anticipate markets will return to a more normal state very soon.
We will remain in our hedges, inverse index funds and puts for the time being. We’ll let you know as we reassess the markets, so stay tuned.
Join us today in the trading room for our LIVESTREAM broadcast
during market hours, as we navigate the current environment. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Want to become a member? Check details here:
Disclaimer: Do your Own Research
Our content is intended to be used and must be used for informational purposes only. It is very important to do your own analysis before making any investment based on your own personal circumstances. You should take independent financial advice from a professional investment advisor in connection with, or independently research and verify, any information that you find on our Website and wish to rely upon, whether for the purpose of making an investment decision or otherwise. Trades and or positions listed and taken from the watchlist are my own and should not be considered “advice” to enter any particular position or asset.
We would like to draw your attention to the following important investment warnings. The value of shares and investments and the income derived from them can go down as well as up; Investors may not get back the amount they invested – losing one’s shirt is a real risk; past performance is not a guide to future performance.
Live broadcasts are educational in their content. Proper risk management is considered on every trade or asset mentioned.
*** Stocks highlighted are for information purposes only and should not be considered as advice to purchase or to sell mentioned securities.
As always, the use of technical and fundamental analysis is encouraged in order to fine-tune entry and exit points to average seasonal trends.
These mentions are stocks that we may or may not decide to trade as outlined in the watchlist. Always use a stop.