It is no good investing in this market unless you have a theory. The whole worlds governments are working together to support the market. There is no doubt that this plan to support the market exists and many of the details are public and the only question is whether it will pan out or not.
In such a situation what is the plan? It is push money into the economy to tide it over. The method is various QE shaped programs pus some outright printing.
While people moan about QE and that it doesn’t help them, this is untrue, QE gives money to the rich through asset priced inflation, to the middle classes through house price inflation and employment and the poor through employment and social benefits. Without QE the non-rich should make no mistake that their houses and jobs would be far less valuable than they are now. So here we go again galloping down the road nf ‘New Monetary Theory.’ The market will be fixed, as in mended and as in artificially set.
That is a theory, if it is correct that has consequences.
You cant go fixing the US stock markets let alone the global markets blind folded. You have to have sa reasonable plan.
I think it looks like this.
The premise to this prediction is:
It makes no sense to drive the markets back to all time highs. These programs will have a dramatic future cost so there is no appetite to overdo it.
You can see where the Federal Reserve lost its nerve last year when QT cratered the market, so you can guess levels below that are out of bounds.
The 200 day average, a sort of technical indicator benchmark held as important by many is coming into the boundary range and can be used as an extra guild to fine tuning liquidity.
The range is broad enough to take most shocks and thereby remove the panic potential of a sudden drop into the abyss by a upset generating stampede.
Optically it will look just fine
If this thesis is correct, we should quickly see a market calming, with a marked drop in volatility. The 1000+ point range days should go and we should quickly head back to 200+ then 50+ ranges.
The outcome however is not actually in the hands of central banks, it is in the hands of the govenments and their lockdowns. It these come down in May, then things will likely pan out. June will be too late to avoid a dep recession and most likely a depression. If the lockdowns stay in place through July/August we will be looking at a lost generation.
While things are looking positive now it is good to remember this chart:
To get there it takes a long lock up that stretches into the summer. In the end that’s the only thing an investor needs to track. All the money in the world won’t fix a dead economy.