Technicals:
- S&P500 broke a long term uptrend and now is seeing a rebound. a rebound was expected given the current level of volatility. I expect the price to get rejected at the long term uptrend line, but a throw-over is in the cards as it would be a perfect bull trap
- support boxes are drawn out. these levels are likely contenders for a solid bottom since there should be many buyers interested at those prices.
Fundamentals:
- the exponential growth of the coronavirus in the US and worldwide leading to economic shutdowns
- Saudi vs. Russia oil price war leading to the lowest prices in decades
- huge debt burdens, high default risks
- historically high valuations (even after the crash) according to Shiller p/e, total market cap to gdp, etc.
- unemployment spike, literally highest in history (3.28 million in one week in the US, ~1 mill in Canada) and expected to worse
- desperate central banks running out of levers for controlling the economy (interest rates at 0%, currency at risk of devaluation or loss of reserve status if QE is taken too far)
- political uncertainty regarding 2020 elections, lack of good candidates, high probability of tax hikes
- very similar environment as 1929 before the great depression, end of the long term debt cycle, interest rates hitting 0%
Sentiment:
- worldwide panic lead by fearmongering media outlets
- overall bearish attitudes towards the markets leading to a lack of liquidity
- once we break previous lows near $220 on SPY, expect a lot of panic selling
My Approach:
- dollar-cost-averaging into index funds diversified internationally, still 85% cash currently
- higher than usual weight into REITs and emerging markets, US equities still have low expected returns at current valuations
- expecting this bear market to last at least 6-12 months, possibly multiple years, no need to FOMO and spend all cash quickly
- lots of opportunities for individual stock picking, ETFs are dumping holdings systematically based on the market cap without regard for fundamentals
TL;DR: the economy is a shit show & the crash is just getting started
- S&P500 broke a long term uptrend and now is seeing a rebound. a rebound was expected given the current level of volatility. I expect the price to get rejected at the long term uptrend line, but a throw-over is in the cards as it would be a perfect bull trap
- support boxes are drawn out. these levels are likely contenders for a solid bottom since there should be many buyers interested at those prices.
Fundamentals:
- the exponential growth of the coronavirus in the US and worldwide leading to economic shutdowns
- Saudi vs. Russia oil price war leading to the lowest prices in decades
- huge debt burdens, high default risks
- historically high valuations (even after the crash) according to Shiller p/e, total market cap to gdp, etc.
- unemployment spike, literally highest in history (3.28 million in one week in the US, ~1 mill in Canada) and expected to worse
- desperate central banks running out of levers for controlling the economy (interest rates at 0%, currency at risk of devaluation or loss of reserve status if QE is taken too far)
- political uncertainty regarding 2020 elections, lack of good candidates, high probability of tax hikes
- very similar environment as 1929 before the great depression, end of the long term debt cycle, interest rates hitting 0%
Sentiment:
- worldwide panic lead by fearmongering media outlets
- overall bearish attitudes towards the markets leading to a lack of liquidity
- once we break previous lows near $220 on SPY, expect a lot of panic selling
My Approach:
- dollar-cost-averaging into index funds diversified internationally, still 85% cash currently
- higher than usual weight into REITs and emerging markets, US equities still have low expected returns at current valuations
- expecting this bear market to last at least 6-12 months, possibly multiple years, no need to FOMO and spend all cash quickly
- lots of opportunities for individual stock picking, ETFs are dumping holdings systematically based on the market cap without regard for fundamentals
TL;DR: the economy is a shit show & the crash is just getting started
