What next for this market?

[mc2fool]

Yesterday's big FTSE rise is now explained if big investors knew about this in advance.

A lot more to do with optimism about the US $2 trillion stimulus bill going through, methinks.

[Itsallaguess]

Yesterday's big FTSE rise is now explained if big investors knew about this in advance.

A lot more to do with optimism about the US $2 trillion stimulus bill going through, methinks.

Or perhaps even a variety of positive things looking to head in the right direction all at the same time..

I see that Italy have just released their latest figures, and I note that the most recent 'Daily new cases' figure of 5210 is now the fourth day on the run that the number is below the peak figure of 6557, reached on March 21st...

Italy went into lock-down on March 13th, so eight days later it might be seen that the peak 'New cases' figure on the 21st, if that's what it turns out to be, and with a trending downwards slope from that point, might well give lots of confidence for those other countries slightly behind the infection curve but in lock-down procedures of their own..

If the UK follows a similar trajectory, having it's first full day of lock-down on March 24th, we might begin to experience a similar 'New cases' peak around the 1st or 2nd of April...

Chart of Italy 'Daily new cases' here, but not yet including the 5210 figure for today, March 25th -



Information source for Italy figures and charts - https://www.worldometers.info/coronavirus/country/italy/

I should add that the above chart was the primary reason that I decided to dip my toe back into the market yesterday...

Cheers,

Itsallaguess

[colin]

Hedge fund turns optimistic,
https://citywire.co.uk/funds-insider/ne ... +Afternoon
I have no idea if Acman is right or not.

[redsturgeon]

Yesterday's big FTSE rise is now explained if big investors knew about this in advance.

A lot more to do with optimism about the US $2 trillion stimulus bill going through, methinks.

Or perhaps even a variety of positive things looking to head in the right direction all at the same time..

I see that Italy have just released their latest figures, and I note that the most recent 'Daily new cases' figure of 5210 is now the fourth day on the run that the number is below the peak figure of 6557, reached on March 21st...

Italy went into lock-down on March 13th, so eight days later it might be seen that the peak 'New cases' figure on the 21st, if that's what it turns out to be, and with a trending downwards slope from that point, might well give lots of confidence for those other countries slightly behind the infection curve but in lock-down procedures of their own..

If the UK follows a similar trajectory, having it's first full day of lock-down on March 24th, we might begin to experience a similar 'New cases' peak around the 1st or 2nd of April...

Chart of Italy 'Daily new cases' here, but not yet including the 5210 figure for today, March 25th -



Information source for Italy figures and charts - https://www.worldometers.info/coronavirus/country/italy/

I should add that the above chart was the primary reason that I decided to dip my toe back into the market yesterday...

Cheers,

Itsallaguess

All of the experts expected the result from Italy since in total lock down the virus has nowhere to go...however nobody knows what happens when you release the lock down. One theory is that you can release things only temporarily before you have to repeat the lock down and repeat the whole process until you have the vaccine or reach herd immunity. It would be a mistake to look at Italy and think this is all over by June (or even Easter!)

John

[Itsallaguess]

It would be a mistake to look at Italy and think this is all over by June (or even Easter!)

I totally agree John, and I'm not making that mistake, but I think it's valid to see some value in understanding that measures can be put in place to control the spread of this virus, what those measures are, and what time-scales those measures take to deliver a given benefit.

Italy, at the current time, seem to be delivering on all three of those fronts, with their early lock-down and the subsequent data that's come from it, and I think it's going to be hugely important for all of us to be able to learn and benefit from their experience.

Cheers,

Itsallaguess

[redsturgeon]

Sure, totally agree with all that iaag.

My thinking is that this process is going to get worse though, a lot worse, especially in the US and I can't see the stock market not going lower from here. Sure, there will be some good days but show me a bear market that ever went down in a straight line.

I had been toying with the idea of buying back in but I can't bring myself to enter a market that swings so wildly up and down on unpredictable events.

It has been quite amazing how steadfastly the market has moved down up until now considering the big bazookas that have been fired over the last weeks and the 10% uptick is par for the course.

John

[Itsallaguess]

My thinking is that this process is going to get worse though, a lot worse, especially in the US and I can't see the stock market not going lower from here. Sure, there will be some good days but show me a bear market that ever went down in a straight line.

I had been toying with the idea of buying back in but I can't bring myself to enter a market that swings so wildly up and down on unpredictable events.

Difficult to disagree with that, and I suspect that Trump might have to learn some things about this virus the hard way unfortunately, but I do note that Minnesota and Idaho have now also issued 'stay at home' orders to their citizens, bringing the total number of states to do so to 18, including New York and California, so there are some signs of encouragement that they might be starting to take things a bit more seriously...

With the above said, there comes a point for me where dipping a toe into such dramatic falls starts to make some sense on a medium to long-term outlook, and I'm happy that if there's further falls to come then I've got options available to take advantage of those too.

For the avoidance of any doubt, I'm certainly not piling in, and for many of the reasons that you quite rightly point out..

Cheers,

Itsallaguess

[redsturgeon]

I know I should really start toe dipping too, I just can't bring myself to do it.

John

[richfool]

For what it's worth, I think further falls are to come. C19 is going to get worse before it gets better and thanks to Trump the US hasn't grasped the nettle. We also don't yet know about possible second waves in China or wherever.

[zico]

I know I should really start toe dipping too, I just can't bring myself to do it.

John

Well, I certainly completely mistimed the moment to sell a big chunk of shares, but by what I can only describe as pure dumb luck, I've escaped very lightly. I moved money out of share-related funds on Friday when the FTSE was at 5150, and it's since gained 10%.
However, I used half of the sales proceeds to buy a gilts fund, on the day when it was at its absolute low (so far, anyway!) and that's gained 12% in the same time. I'm also holding 50% cash, so on average, I've gained 6% since Friday as opposed to 10% if I'd sat on my hands. I now need to understand more about gilts, seeing as I've just used the gilts fund as a convenient bolthole to avoid holding cash, so would be useful for me to understand the market expectations for gilts in various scenarios.

My plan now is to start drip feeding the cash back into the market on a weekly basis, but it's tough to actually do it when the market has had such an upwards surge and for me at least, the fundamentals haven't changed. There's an old financial saying "If the USA sneezes, the world catches a cold" which might need a more deadly update if the USA makes a mess of dealing with the virus, and the US seems to be all over the place with strategy, messaging, approaches and operational readiness.

Interesting to note that the latest UK covid death figure didn't come out this afternoon at the usual time. It seems they're being moved to 9am every morning, but the change in timing seems suspicious - so I suspect there's a scary-looking increase in the UK figures (it was up 89 yesterday, which had previously been the biggest daily number). If the mortality rates are similar to the estimates for other European countries, my estimate is that there will be getting on for 10,000-20,000 deaths per peak month for every time a major European country isn't in lockdown. Having more information will be key to getting on top of the situation, but paradoxically it will also make for politically difficult decisions if the choice to open up an economy can be measured in numbers of likely deaths.

[zico]

For what it's worth, I think further falls are to come. C19 is going to get worse before it gets better and thanks to Trump the US hasn't grasped the nettle. We also don't yet know about possible second waves in China or wherever.

Certainly agree about Trump, and also the USA is notoriously bad anyway at dealing with unforeseen natural disasters (e.g. Hurricane Katrina).

However, the crucial difference with potential second waves is that next time the world will be prepared. Early detection, contact tracing and miniature lockdowns will be crucial in stopping further waves getting a foothold again in countries.
Most countries have been too slow and unprepared this time, with countries slow to realise the vital importance of stopping the virus early, with the notable exception of South Korea, which must be the poster boy for dealing with future outbreaks.
Investing in effective epidemic prevention will be the best investment a country can make.

[scrumpyjack]

Of course it isn’t a matter of whether things are going to get worse, but whether they will be worse than the markets’ expectation of what is going to happen. But I doubt if anyone knows what future outcome the current market level discounts.

If cheap tests of whether one has had the bug (or has it) become quickly available on a very large scale that could be seen as a turning point because then those who have had the bug will be able to become economically active again as they can’t catch it and can’t pass it on. In that event one could see a very sharp recovery.

I still prefer the ostrich strategy of doing nothing. I haven’t sold and I am not buying. I think things will recover eventually, though it may take years. It isn’t to me worth the risk of investing one’s cash buffer to make a quick buck.

[webbm00]

While jumping between "jump in you've missed the boat" and "wait for a year so this has hopefully all blown over" I found an article that has swung me back to the wait and see

https://www.proactiveinvestors.co.uk/companies/news/915774/ftse-bear-traps-investors-warned-about-jumping-back-into-stock-market-915774.html

Six of the Footsie’s ten single-largest percentage daily gains of modern times came between September and December 2008, though the index kept on falling and only reached its eventual bottomed in March the following year.

This meant some of these one-day gains were followed by falls of nearly 30% as other events unravelled.

Analysis of the FTSE's three other previous bear markets, in 1987, 1998 and 2000-03, shows many more sharp rallies, that Mould notes "cruelly turned out nothing more than bear traps for the unwary, who were tempted into a ‘buy-on-the-dip’ strategy, only to quickly find themselves in trouble".

[tikunetih]

No one knows what will happen. We can look to history for guidance as to how people have behaved previously, but circumstances and events always differ, and people adapt, so we don't know what'll happen this time.

In the GFC I view the early October 2008 lows (following Lehman) as the Panic Low: people dumping things in a "just get me out, I'll take any price, just make the pain go away" frenzy. S&P500 bottomed around 839 and rallied.

But that wasn't *the* low. Following that Panic Low, two further lows followed: 741 in mid December 2008 during a retest of the post-Lehman lows, and then what I'd term the "Despair Low" of 666 at the start of March 2009. So, 5 months after the post-Lehman low we finally saw the eventual bottom.

The investor mood during that period from October to March changed. The panic was palpably less, and the focus shifted to how much damage the global economy had sustained, with competing forecasts for how long the New Depression would last. I don't believe that sellers in the final few months were panicking but instead they were despairing that a recovery would ever come and they just gave up on it and gave up on holding stocks. Vast amounts of pessimism, but not so much panic compared to the October lows, hence the "Despair Low".

That could certainly happen again, but equally many people are aware of that 2008/09 playbook as it's in so many people's direct personal experience and memory.

Wait and see!

[zico]

Well, that was a very strange 7 days for the market. I made a big move from shares to gilts & cash, and although pretty much everything happened as I expected, the market finished a full 7% higher after being 13% higher at one point, despite no major unexpected news.

Fed rescue package, Senate approval of US injection and UK self-employed help all happened last week as expected. It's not really a surprise that 2 government minister got the virus, but the Chief Medical Officer as well was a bit of a surprise.

I was wondering last night if the reason for the big rise was if the G20 economies were gearing up to shorten lockdown measures and take the pain of lots of deaths in a bid to restart the world economy sooner. Trump talked about it a lot, but next week he'll probably be telling us how keen he was to lockdown, depending on how the news goes.

The biggest positive from this week is that we're 7 days closer to the end of all this, and have an extra 7 days of governments getting used to a new situation, and 7 days of clever scientists working on new vaccines, better understanding of virus spread and mortality rates, and better coping strategies for living with the virus until a vaccine appears.

I can't see any positive news to make the markets happy in the next few weeks. If we're talking about a war on the virus, it feels like Rorke's Drift at the moment - the barricades have been manned and the preparations complete, countries have largely done what positive steps they can (except for USA) and the big wave of attacks is about to start. There'll be lots of media coverage of New York hospitals being overwhelmed (hopefully not London too).

The markets will have surely priced a lot of this in, but will the relentless negative press coverage affect market sentiment and force it down? I'm sticking with my plan of buying funds on a weekly basis, with perhaps a big cash injection if markets really tumble.

[dealtn]

I'm sticking with my plan of buying funds on a weekly basis, with perhaps a big cash injection if markets really tumble.

Not the only place I've seen this, so nothing personal, but where are people finding the ammo to keep buying, or using "...a big cash injection..."?

I would have thought most folks would be allocating funds to general living expenses. It seems some appear to have a "bottomless pit" of funds for reinvestment. With dividends drying up to a trickle, even this source isn't open going forward.

[GoSeigen]

I'm sticking with my plan of buying funds on a weekly basis, with perhaps a big cash injection if markets really tumble.

Not the only place I've seen this, so nothing personal, but where are people finding the ammo to keep buying, or using "...a big cash injection..."?

I would have thought most folks would be allocating funds to general living expenses. It seems some appear to have a "bottomless pit" of funds for reinvestment. With dividends drying up to a trickle, even this source isn't open going forward.

Some of us are hedged

Some of us not enough

I'm gradually liquidating positions in gold and gold stocks, as well as short index etfs, and have chunks of FI to redeploy when the time is right.

GS

[mc2fool]

Not the only place I've seen this, so nothing personal, but where are people finding the ammo to keep buying, or using "...a big cash injection..."?

I would have thought most folks would be allocating funds to general living expenses. It seems some appear to have a "bottomless pit" of funds for reinvestment. With dividends drying up to a trickle, even this source isn't open going forward.

I would hope that all folks would have allocated funds to general living expenses well before they'd started in market investments in the first place!

Having said that, I suspect that the common-or-garden advice of having (just) at least three months worth of living expenses in savings before entering the markets could be seriously tested for some people in the current situation. I've never thought that was anywhere near enough, although how much more it should be is a very person specific matter....

[Itsallaguess]

I'm sticking with my plan of buying funds on a weekly basis, with perhaps a big cash injection if markets really tumble.

Not the only place I've seen this, so nothing personal, but where are people finding the ammo to keep buying, or using "...a big cash injection..."?

I would have thought most folks would be allocating funds to general living expenses. It seems some appear to have a "bottomless pit" of funds for reinvestment. With dividends drying up to a trickle, even this source isn't open going forward.

I think the answers you're going to get are likely to be different for what I'd perhaps call 'sophisticated investors' (i.e. investors with more technical experience in these matters - so perhaps read someone like GoSeigen as being in this category - https://tinyurl.com/w5wkjnr..), and those that are much 'less sophisticated', and I'd most certainly lump myself into that latter investor-category...

So personally speaking, and with that said, many years ago as my invested portfolio started to grow to a considerable sum, or at least a 'considerable sum' for a lowly farm boy like me, I found that I needed to alter my strategy so as to 'allow myself' to remain 'fully invested' with my 'currently-invested portfolio', whilst at the same time giving myself something to help me sleep at night for when these really quite inevitable market crashes come around.

I initially typed 'in case they come around' there, but using those words doesn't really explain the fundamental inevitability of these market drops, so I've removed the phrase 'in case' from the previous sentence, and said it like it is - simply inevitable...

So the best way I've found that works *for me* regarding these 'inevitable' issues is to always maintain at least 'some level', and in reality 'a number of levels' of cash funding or near-cash-equivalent, that can be called on to take advantage of these types of market drops. I don't hedge with gold, or any other of the fancier instruments available like bonds etc., so I've nothing 'sat there' in normal-conditions that I'd expect to 'go up' whilst everything else might be 'going down', which might then be available to sell to generate funds - I just have some cash, and then a few other 'layers' of near-cash that I can call on should push come to shove.

It's clear that during 'normal market conditions', those funds will sit where they are and *generally* lose money to inflation, and I'm really quite content with that. I pay money to insure my house, and I pay money to insure lots of other things in my life that are important to me, and which would be difficult to replace, and so I see any 'money lost' on those available funds to be another 'insurance cost', and nothing more. No problem, I don't worry any more about that particular aspect...

But now, during these types of hugely volatile market drops, that insurance can come into play. I can access that cash if I think I want to invest some of it, and I can drop the capital into the market as and when I want to. I've done some of that earlier this week. If my first layer of cash were to be depleted, which is some way off as we currently stand, I've got access to an NS&I account with some more in, and then I've also got access to some Premium Bond capital, which can again be made available at really quite swift time-scales if required.

I'm also still working, and that enables me to have monthly additional funds available to invest in these kinds of market drops, as well as any dividends that come in from what is primarily an income strategy that I'm running. If the market stays around it's current levels, I would expect to perhaps release the rest of the first-level cash that I've got left over the coming months, and also add to that some cash from my monthly wages and dividends as they come in. My current thinking is that the NS&I funds, and the Premium Bond capital will only get touched if we see any further dramatic falls from current levels, but I am prepared for that scenario and will have no problem processing those funds as required if that were to come about..

So, for a simple farm boy like me, the above strategy helps me sleep at night very well during 'normal market conditions', and whilst the value of my invested-portfolio has taken a hit from the current market turmoil, the cash-element part of my approach has now come into play, and I'm taking advantage of that as part of my overall strategy.

I have absolutely no doubt that there are more efficient ways that I could be managing the above issues, and I'm sure many here do, but the requirements for this part of my strategy are only that I know that I'm doing 'something' to enable me to manage during these types of inevitable situations, and to be able to take advantage of them when they occur, and also that the approach is both simple to understand and simple to execute, and all of those boxes are ticked with the above process.

The above approach worked well, for me, during the financial crash of 2007/08, and I expect it to work well during these current issues too.

Cheers,

Itsallaguess

[TUK020]

I'm sticking with my plan of buying funds on a weekly basis, with perhaps a big cash injection if markets really tumble.

Not the only place I've seen this, so nothing personal, but where are people finding the ammo to keep buying, or using "...a big cash injection..."?

I would have thought most folks would be allocating funds to general living expenses. It seems some appear to have a "bottomless pit" of funds for reinvestment. With dividends drying up to a trickle, even this source isn't open going forward.

I posted on HY Strategies an item 'Portfolio tweaking'.
Liquidated a portion of my physical gold ETF (PHAU) and of my short dated band ladder ETF (IS15), plus used some divid cash to top up a couple of things. Waiting until next month to use the dollop of cash lined up to transfer into next years ISA allowance.