Obviously, the Coronavirus situation just keeps going from Bad to Worse and on Friday Bank Of America CIO Michael Hartnett put out a report. Here is an excerpt from the commentary:
“What does this unprecedented shift in investors sentiment mean for the global economy? Alas, nothing good: according to Hartnett, who may or may not speak for all of Bank of America, the “working assumption is that as of March 2020 we are in a global recession” (see PMI of world’s 2nd largest economy China); with the sharp drop in 2020 global EPS estimates (8.7%, down from 10.7%) just beginning.”
Also on Friday a huge Trading Firm in Chicago “Blew Up” and was “Carried out on a stretcher”. I don’t know which Firm it was yet but it will hit the news wires soon enough.
On Saturday Goldman Sachs’s Equity Strategist, David Kostin, put out a report. Here is an excerpt from the commentary:
“We estimate the yield gap will narrow to 395 bp by year-end as economic activity and confidence rebound, leading S&P 500 P/E to recover to 19.4x and the index to reach 3400, 14% above the current level.”
That’s the optimistic case.
In the not so optimistic one, Kostin admits that “the US economy could slip into a recession if the coronavirus contagion lasts for an extended period of time”; as a reminder, just yesterday we noted that a global recession is now Bank of America’s baseline assumption. In such a situation, Goldman estimates S&P 500 EPS would fall by 13% to $143 in 2020 and the index would decline to 2450 by year-end.”
Just today there is a report of Saudi Arabia starting an “All Out Oil War”:
“Following Friday’s shocking collapse of OPEC+, when Russia and Riyadh were unable to reach an agreement during the OPEC+ summit in Vienna which was seeking up to 1.5 million b/d in further oil production cuts, on Saturday Saudi Arabia kick started what Bloomberg called an all-out oil war, slashing official pricing for its crude and making the deepest cuts in at least 20 years on its main grades, in an effort to push as many barrels into the market as possible.”
Goldman also just cut their Oil Target Price to $30 with dips down to $20 per barrel possible.
And from commentary on a JP Morgan Report just today:
“Alternatively, woe to markets if the Fed does nothing in the next 24hours.
And while JPMorgan’s conclusion is somewhat more balanced, the implication is the same: “in all, we see initial signs of emerging credit and funding stress. If these shifts in credit and funding markets are sustained over the coming weeks and months, especially in the issuance space, credit channels might start amplifying the economic fallout from the COVID-19 crisis.”
In other words, if you think the equity plunge so far has been bad, just wait until the credit markets fully seize up.”
Where things stand right now, Oil is Set to Open down $10 a Barrel or effectively down about -25% and Dow Jones Industrial Futures are set to Open down about -700 points tomorrow morning.
As mentioned above IF the Fed does nothing in the next 24hrs. This is just the reality as it stands today.
Our mission as a Firm is to Invest for Growth but also Mitigate Market Losses for our clients and Preserve their Wealth. THAT is how you “Beat the Markets”.
In that vein, here are our up to date “Lifetime” Performance numbers through 3/6/20:
Conservative “Total Return Income” Model [+7.63%] Vs. “Broad US Markets” [-14.80%]
Inception date 08/01/2017 – thru – 3/6/2020
Moderate “Global Opportunity” Model [+4.33%] Vs. “Broad US Markets” [-14.80%]
Inception date 08/01/2017 – thru – 3/6/2020
Aggressive “100% US Equities” Model [+9.15%] Vs. “Broad US Markets” [-20.81%]
Inception date 08/01/2018 – thru – 3/6/2020
Aggressive “100% International Equities” Model [+2.15%] Vs. “Broad US Markets” [-20.81%]
Inception date 08/01/2018 – thru – 3/6/2020
Contrarian “Long/Short All Weather” Model [+1.30%] Vs. “Broad US Markets” [-14.80%]
Inception date 08/01/2017 – thru – 3/6/2020
We do what we say, we say what we mean and the numbers speak for themselves. “Buy & Hold” Investing is a Fallacy. If the Pain of that approach is too much and you are currently looking for a New/Better approach to investing, we are here to help you.
My aim is to level the playing field and help keep you ahead of the curve with the view from a man who walks to the beat of his own drum, not that of Wall Street’s.
In addition, here is the link to our “Model Funds and Lifetime Performance Graphs” (Updated Monthly): https://hkwmanagement.com/portfolio-models/