Weekly Briefing 4/25/20

Economy

Our Analysts and Research Staff have begun to assemble what the post-corona world will look like. There will be many trends to profit from. Covid-19 will change how we work, eat and play. Many new industries will rise, while others will go bankrupt. Travel, gyms, restaurants, live entertainment, movie theaters, retail, real estate and oil will all suffer until there is a vaccine or treatment.

Equity Markets

Expect the US Equity Markets to recover and move higher. First, don’t bet against American science and ingenuity. There will be superior treatments released in the coming months and ultimately a vaccine. Although the actual death rates of the coronavirus are slightly higher than the actual flu, what really scares the common person the most is its ability to kill random victims both young and old with no underlying health issues. This is something  the common annual flu strain does not do.  Add in the excessive fear created by some of the Media for both political advantage and viewership, and you have the perfect storm. So where does this leave the US Equity Markets? Only one direction and that’s higher for two distinct reasons. First, the Federal Reserve has unleashed unlimited Quantitative Easing, QE, in excess of 6 trillion dollars when adding in the US Treasury stimulus. Second, and most important of all is one dominating point: The US Equity Markets are the nicest house in an ugly global neighborhood of markets. Large institutional money needs a place to safely park and keep their assets. We are talking about trillions of dollars. Can bonds go higher? Sure if rates were to go negative in the US, but we don’t expect that to happen anytime soon. The minute a vaccine and more effect treatments are circulated expect the Federal Reserve to raise rates. You can also expect countries across the globe to get their credit ratings downgraded in light of sovereign debt spiraling out of control. For debt positions we want to avoid all Euro-Zone debt and keep US debt to 3 months or less. Thus, bonds are nothing more than a short term parking garage for capital. Now what about Real Estate? Not a prayer sadly. With state and local governments broke expect tax increases across the board, including property taxes. Add in all the money printed and endless QE and you can expect interest rates to eventually rise sharply as they tried to do back in September 2019 - kicking off the Repo Crisis in the US. Overnight rates shot up as high as 10% before the Fed stepped in to calm things. Higher rates make it harder for new home buyers. Our staff’s bottom line is the DOW and SPX multi-national corporations have the best balance sheets on the planet. Top-tier equities will become the new parking garage for international, domestic, and institutional capital. Yes, they will be overvalued and have excessive price earnings ratios but that will not deter the big money. It all comes down to capital flows which must be followed to make money in any market on a long-term basis.

As one can see from the sentiment chart above, when bearish sentiment reaches record levels the stock market begins to climb. We are at that point now.

Expect the SPX to test the the 200 daily moving average very soon.

 Nasdaq  and semiconductors have already recovered the 10,50 and 200 moving averages .

The big picture on gold is to expect much higher prices into the third quarter of 2020. Invest in yourself and become a gold member at HFZ to profit from our Analysts and Traders timely research. Over the past two weeks we have entered two new positions for HFZ and both are up nicely with plenty of more upside to come. Great volatility offers the potential to harvest great profits.

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