The market oversell is already well past the point of rationality, and that’s when the vultures start swarming, feeding the panic and making the selloff even worse while they rake in millions on shorts.
Enter ‘Dr. Doom’, who is calling another market crash. But this time, it’s not just coronavirus panic calling the shots, he says, it’s politics--because Trump is “dead” and the Democrats are lame.
Also known as economist Nouriel Roubini, ‘Dr. Doom’ told Germany’s Der Spiegel that he expects “global equities to tank by 30% to 40% this year”, and he advises all to put their money into “cash and safe government bonds”.
And while ‘Dr. Doom’ is telling everyone to hedge against a crash, if everyone decides they’re “better safe than sorry”, in an interminable cliche, the market will certainly come crashing down around us.
The flurry of panic even succeeded in temporarily shutting down Robinhood, the no-fee trading app adored by younger generations who appreciate the leveling of this playing field.
That’s some heavy trading volume, indeed. So please keep feeding the panic.
The problem with panic is that it’s much more dangerous than the coronavirus itself. Those who wouldn’t panic get caught up in the wave, worried that the fear-sellers will force the entire market down and take everyone with them.
The panic certainly won’t help Trump.
His re-election sort of depends on not having a market crash, which Trump is blaming on the coronavirus and the Democrats, whom he accuses of hyping this up in the media.
What’s burdening him is probably the story told in a collection of charts published by Forbes comparing the markets under Obama and Trump. The first one shows the Dow up 28% under Trump, while over the same timeframe it was up 62% under Obama.
Here’s the thing about the market, and panic. There are usually enough level heads around to see the opportunity and buy on the dip.
That’s what happened this morning, pushing the Dow to jump as much as 1200 points. It still has a ways to go because last week was the worst week the market has seen since 2008.
“The market has been conditioned to buy on any weakness,” Keith Buchanan, portfolio manager at GLOBALT, told CNBC. “I think we’ll look back at these past few years at some point as some level of complacency.”
Aside from the level heads that manage to stay above water and view the opportunity to buy on the cheap, the market will also start responding to hints of central bank stimulus.
What the markets want to hear is that someone is going to step in with some creative fiscal policies to prop things up before it hits a point of no return.
Already, stocks in London are on the rebound because investors are hedging their bets that there will be some stimulus.
Markets are also being buoyed to some extent by Credit Suisse’s statement that the economic response to the coronavirus crisis must be government-led.
So, panic if you want to, but it’s not helping anyone. The oversell is oversold, and this is clearly a buy-the-dip opportunity.
By Josh Owens for Safehaven.com
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