Bull In A China Shop

Bull in a china shop.  Stocks declined on Friday capping off a wild week of trade in which equities mounted their largest 3-day rally since the 1930’s.  The President signed the $2 trillion CARES act into law but investors have fears that it may not be enough.




A bull amongst the bears.  Last week’s 3-day rally was one for the record books, and record book authors were not the only ones paying attention.  After hitting a high on February 19th stocks dropped precipitously by almost -34% by March 23rd. In the interim, an 11-year bull market ended with a bang, leaving investors stunned.  Money market funds saw record inflows, and those funds not only came from equity funds, but also from taxable and municipal bond funds, which both logged record outflows.  In other words: people were selling!  Until last Wednesday when markets leapt up, firing off a 3-day rally rivaled only by one in 1931.  The 3-day rally officially marked the end of a bear market… an 11-DAY old one. This left investors who just days before headed for the hills with their capital, dumbstruck and wondering if they had been hoodwinked by the markets. Many investors think back to the dark days of 2008 as the financial markets were collapsing, mortgages were foreclosing, and jobs were being lost.  Stocks took a drubbing between October of 2007, having made a new high, through July of 2008 entering a bear market.  By mid-September, stocks were down another -3% when Lehman Brothers filed for bankruptcy on September 15th.

In the wake of the Lehman collapse, the losses accelerated and stocks fell an additional -39% in just over a month.  Those were tough times for investors, indeed. But alas, hope sprung and stocks surged rapidly.  Just 18 days after putting in the post-Lehman low, stocks entered a bull market once again.  Many investors rushed in, convinced it was the bottom for stocks, yet the nation was still in the midst of a recession and unemployment was still on the rise.  Do you feel as if I am setting you up for something?  After rising an additional +3% through the new year, stocks took a turn for the worse, falling an additional -28% and hit a new low by March 9th.  On March 10th, CNBC anchor Mark Haynes famously uttered the words “I’m going to step out on a limb here – I think we are at a bottom.  I really do.” Well, he was right… and probably very lucky.  Stocks did go up from there, some +400% through February 19th of this year.  Of course there is a moral to this rambling story.  You can have a bull market within a secular bear trend.  Sounds technical but it is important to note that in times of high volatility, it is not uncommon for markets to appear to have reversed a longer term trend, luring in anxious investors, who ultimately get stuck in what is referred to as a “bear trap”.  It is too early to tell if last week’s rally will continue and, no doubt, this ugly chapter will ultimately end providing a buying opportunity similar to the one back in 2009.  If you weren’t as lucky as Mark Haynes and waited to see the end of the recession before buying, you would have still made +283% through the recent high… not too shabby.  Attempting to pick a bottom when there is still so much uncertainty and such high volatility is more likely to yield pain than happiness.  In just a few weeks from now, we will have more information to go on and two weeks beyond that, yet more. As real data starts to come in over the next few weeks and months, we may finally have enough to go out on an “informed limb” and call a bottom.




Stocks sold off on Friday after a neck-breaking 3-day rally.  The House sent the $2 trillion CARES deal to the President who signed it into law.  With the stimulus package already priced into the markets and rebalances complete, investors worried that the package might not be enough.  The University of Michigan Sentiment Indicator for March was revised down to a final 89.1 from its earlier estimate, missing expectations.  The S&P500 fell by -3.37%, the Dow Jones Industrial Average sold off by -4.06%, the Russell 2000 dropped by -4.09%, and the NASDAQ Composite Index erased -3.79%.  Bonds slipped and 10-year treasury yields fell by -17 basis points 0.67%.  Crude oil fell by another -4.82%.





– Pending Home Sales are expected to have fallen by -2.0 for February compared to a +5.2% rise in the prior month.

– Dallas Fed Manufacturing Index may have fallen to -10 from 1.2 for March.

– Later this week we will get Consumer Confidence, Chicago PMI, international/local PMI’s, more housing numbers, jobless claims, Factory Orders, Durable Goods Orders, and monthly employment numbers.  A lot of these will start to reflect March activity so markets will become increasingly volatile around the releases.  See the attached economic and earnings calendars for details and check back daily for more color on the releases.


daily chartbook 2020-03-30

econ numbers 3_30

earnings releases 3_30


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