Stock markets ended their worst quarter since the 2008 onset of the Great Recession, with sell-offs so massive that “circuit breakers” were tripped several times to prevent automated selling that could have set off a market crash.
The Dow Jones Industrial Average lost 23 percent during 2020’s first three months, its worst quarter since the panic of 1987. The NASDAQ shed 14 percent, and the S&P gave up 18 percent.
Virtually no sector was spared:
- Energy: -50 percent
- Financials: -32 percent
- Industrials: -28 percent, reaching its lowest point since 2009
- Materials: -27 percent
- Real estate, -20 percent
- Consumer discretionary spending: -19 percent
- Communications: -17 percent
- Utilities: -14 percent
- Consumer staples: -14 percent
- Health care: -13 percent
- Technology: -12 percent
The Stoxx Europe 600 logged its worst quarter since 2002. Japan’s Nikkei index saw its sharpest decline since 2008
U.S. equity markets drooped Friday but rallied Monday, with the Dow up 7.7 percent and the S&P up 7 percent.
Ten-year treasuries were yielding 0.65 percent, edging up slightly from Friday’s yield of 0.59.
In yet another roller coaster day, the Dow, after being up some 900 points, closed down 26 points.
When the markets go down now, it’s because of coronavirus uncertainties.
When the go up, this is an example of the word on The Street being publicized by the business media:
This is the word on The Street being publicized by the business media:
“Investors chose to accentuate the positives, as they have been mostly doing since the bear-market low,” said Ed Yardeni, president and chief investment strategist at Yardeni Research, in a note to clients. “In our opinion, we are in the midst of a Great Rebalancing away from bonds and into stocks.”
“The bear market has most likely discounted a depression-like recession packed into Q2 and Q3,” he said. “It certainly hasn’t discounted the possibility of an actual apocalyptic depression lasting through at least 2021 and beyond. On the contrary, the market’s recent action suggests that investors are betting on an economic recovery starting during Q4 and continuing through 2021.”
Carnival, Norwegian Cruise Line and Royal Caribbean all surged more than 23%. United Airlines and MGM Resorts jumped more than 14% each. Raytheon Technologies led the Dow higher with a 9% surge. Darden Restaurants rallied more than 18% after the restaurant company said it has not used any cash from a $750 million revolving credit agreement. — CNBC, 7 April 2020
TREND FORECAST: As we have long written about presenting hard facts and data, an economic slowdown had well begun before politicians shut down businesses across the globe.
Secondly, when the lockdown hysteria in Italy began and spread to other nations, immediately, we provided socioeconomic and geopolitical trend forecasts that would result from these actions, while the rest of the media ignored the implications.
Forecasts now being made by “experts” of a “U,” “V,” or “W” economic recovery are based on pure speculation in hopes of pumping up equities while ignoring the reality: Never in the History of the World, Part One, Two, or Three has the world witnessed economies going idle and tens of millions of people and millions of business going broke. This is unprecedented.
Therefore, expectations such as cruise lines, resorts, and restaurant stocks spiking double digits, as they are now, discounts the facts that extra cash will not go into slot machines, eating out, or going on a cruise… but rather to pay delinquent bills.
Further, the social distancing dystopia will keep masses from going into business and locations, such as restaurants, concerts, stadiums, etc.
Moreover, large restaurant chains, such as Darden Restaurants, will be among those hit hardest by the months-long clamp-down of commerce.
TRENDPOST: We disagree with the Wall Street, mainstream media, and pundits’ general consensus that consumers, who account for two-thirds of the world’s economic activity, will flow back into stores, restaurants, retail outlets, etc., when lockdowns are lifted.
The millions who have lost income will need to pay overdue bills, replenish necessities, and attend to postponed needs such as car repairs and dental work.
Those who have fared better financially still are likely to be more thrifty than before, having seen the necessity of keeping a comfortable amount of cash on hand.
Consumers’ wariness is sharpened by knowing that no area of the globe has been spared.
In the past, various regions’ economies might have been in trouble but other areas still performed well enough to keep the global economy afloat.
That long-standing norm has been shattered.
Insiders Bet Big on Stock Market Recovery
During the first 24 days of March, more than 2,800 corporate executives and directors have spent about $1.19 billion buying shares in their own companies.
That amount is more than they invested from November through February and five times the monthly average of $235 million during that time.
Insiders from 1,201 companies bought shares, while officials of 685 companies were selling.
Also, the number of individuals buying stock was the most since November 2008.
Typically, insiders investing in their own companies signals optimism about the future, and it reassures others who might put money into those stocks.
Among the CEOs buying big:
- Charles Scharf of Wells Fargo, the shares of which have fallen 43 percent this year. He paid about $5 million for 173,000 shares.
- Lee Tillman of Marathon Oil, which is down 71 percent since December, bought about 131,000 shares for almost $500,000.
- Chris Rondeau of Planet Fitness, which has lost 30 percent of its stock market value in the downturn, paid $4 million for 65,000 shares and became the fifth company insider to buy heavily.
Also, for the first time since August 2011, buyers are outnumbering sellers.
Insider buying has been particularly strong in the materials and energy sectors, with executives at Continental Resources, ExxonMobil, and Sunoco also among the investors.
According to research by Nejat Seyhun, a finance professor at the University of Michigan, stocks that insiders snapped up immediately after the 1987 stock market crash “bounced back.”
“Corporate America is looking to the other side of this [market crash] and saying that the recovery in the second half of this year could be historic,” said Ryan Detrick, a market strategist at LPL Financial.
(For an insider’s look at where he thinks the markets are heading, please see “THE BOUNCING PHASES OF THE MARKET” by Gregory Mannarino.)
Gold Glows
Gold jumped $40 to close out last week at $1,660. Gold closed today at $1,650.
Bitcoin continued to rebound, ending Monday at 7,300, a gain of about 500 from Friday’s showing.
TREND FORECAST: The more cheap money that is printed by central banks, the higher gold and bitcoin prices will rise.
We maintain our forecast for gold to spike above $2,000 per ounce when it stabilizes in the $1,740 range. Our downside risk remains at $1,450 per ounce, with $1,380 as the bottom.
The Oil Game
Oil surged last week after a statement by Russia’s sovereign wealth fund that the nation and Saudi Arabia were “very close” to an agreement to end their price war and Vladimir Putin reportedly supports production cuts of 10 million barrels a day. Presumably, that would reduce production and begin to soak up the global flood of unsold oil.
A meeting between the two parties, however, scheduled for 6 April, was canceled, sending prices lower.
Brent crude dipped $1.06 to $33.05; West Texas Intermediate fell $2.30 to $26.30.
TREND FORECAST: Despite the oil bounce back, prices still remain near 18-year lows as worldwide oil demand has dropped by as much as 30 percent. We forecast that regardless of future production cut backs, prices will remain low.
Furthermore, oil-rich nations, regardless of income levels, whose major revenue source is oil, will be more desperate to bring in revenue rather than cut production.
For example, because Russia’s economy is expected to contract by nearly 3 percent, while poor countries such as Nigeria, with average annual income of $6,372 per person, oil accounts for 86 percent of its export earnings.
First of Many U.S. Shale Oil Producers Goes Bankrupt
Whiting Petroleum, a Denver-based independent oil company that was an early and prominent player in the U.S. shale oil boom, has filed for bankruptcy.
It has $2.4 billion in debt coming due through 2026.
It was due to repay a $262 million balance on a convertible note on 1 April and had been seeking ways to restructure the debt.
The note was convertible to company stock at a price of $156 a share, good terms when the note was written five years ago. But a global oil glut, the long decline in oil prices, the economic shutdown from the virus pandemic, and the new price war between Russia and Saudi Arabia have combined to whittle the company’s share price to $0.67 on 31 March.
Occidental Petroleum, the largest U.S. oil producer, spent $56 billion to acquire Anadarko Petroleum last August; recently, Occidental cut capital expenses, executive salaries, and slashed its stock dividend by 90 percent.
Chesapeake Energy, a shale pioneer, has hired advisors to help it find a way out of a forest of debt, as have shale players California Resources and Gulfport Energy, among others.
Whiting’s troubles “are symbolic of the bigger picture of what’s going on in energy,” said Keven Baer, cofounder of CKC Capital. “The big takeaway is how far-reaching the damage can be… for companies that have a lot of leverage… Whiting is the poster child for how this is playing out.