Emerging-markets investing pioneer Mark Mobius made those remarks Tuesday in an interview with CNBC, putting him in the investing camp that expects an inevitable cascade of brutal economic data and corporate earnings hasn’t been fully discounted by investors.
Mobius, who founded Mobius Capital Partners in 2018 after a three-decade run at Franklin Templeton Investments, said corporate earnings would be “pretty bad” and that while some bargains have emerged, investors should keep some cash ready to deploy in the event of a further market downturn.
U.S. stocks hit all-time highs in February, then plunged into a bear market as the global spread of COVID-19 forced the U.S. and countries around the world to largely lock down their economies in an effort to contain the outbreak. Stocks have taken back a large chunk of lost ground since March 23, however, with recent gains tied to expectations the pandemic is near its peak, turning attention to efforts to reopen economies.
Market bulls have argued that the unprecedented nature of the shock and the massive response from the Federal Reserve, other central banks, and governments have rendered most comparisons to past bear markets debatable.
Others have cautioned that stocks are largely sticking to the bear market script.
“Although there are some opportunities to buy, I would say it’s probably a good idea to keep some powder dry for another downturn,” he said. “We might see a double bottom.”
This Bear Market Rally is still not complete but should be shortly and Here’s When The Bear Market Rally Ends.
We are actually still in a bear market rally with today clearly being another ‘green’ day, it is likely the rally will continue until the herd jumps in again.
It is not uncommon what-so-ever to re-touch near a 50% level during voracious bear markets, however, at this point you can actually argue the market is more over-valued now given the environment than when the Standard & Poor’s was near 3400 ironically enough.
The markets are already trying to price in a possible slowdown in the COVID-19 pandemic. But, even if the Pandemic miraculously disappeared today, the massive economic shock won’t disappear anytime soon.
Major indices all over the world have already plummeted into Bear Territories and the recent rally is simply a correction. In fact, if you look at previous bear markets, you will find plenty of temporary Bullish rallies within the larger Bearish move.
So, do not get emotionally carried away by the bull run right now. Shortly, we will be dealing with bad economic data, a bigger than 2008 recession (likel):
Falling Output. Less will be produced leading to lower real GDP and lower average incomes. Wages tend to rise much more slowly or not at all.
Unemployment. The biggest problem of a recession is a rise in cyclical unemployment. Because firms produce less, they demand fewer workers leading to a rise in unemployment.
Higher Government Borrowing. In a recession, government finances tend to deteriorate. People pay fewer taxes because of higher unemployment and they need to spend more on unemployment benefits. This deterioration in government finances can cause markets to be worried about levels of government borrowing leading to higher interest rate costs. This rise in bond yields may put pressure on governments to reduce budget deficits through spending cuts and tax rises. This can make the recession worse and more difficult to get out of. This was particularly a problem for many Eurozone economies in the aftermath of 2009 recession.
Hysteresis. This is the argument that a rise in temporary (cyclical) unemployment can translate into higher structural (long-term) unemployment. hysteresis
Falling asset prices. In a recession, there is less demand for buying fixed assets such as housing. Falling house prices can aggravate the fall in consumer spending and also increase bank losses. This fall in asset prices is particularly a feature of a balance sheet recession (e.g. 2009-10) recession.
Falling share prices. Lower profits lead to lower levels of share prices.
Social problems related to rising unemployment, e.g. higher rates of social exclusion.
Increased inequality. A recession tends to aggravate income inequality and relative poverty. In particular, unemployment (relying on unemployment benefits) is one of the largest causes of relative poverty.
Rise in Protectionism. In response to a global downturn, countries are often encouraged to respond with protectionist measures (e.g. raising import duties). This leads to retaliation and a general decline in trade which has adverse effects.
These factors are not at the top of the news yet cycle right now. But I assure you that when the Corona-Virus takes a back seat to the Presidential Election, the reality will set in and we will witness a new test of the bottom.
So, such rallies as the one we are seeing now will be sold aggressively and markets will plummet into fresh lows. Until a 50%-55% drop has happened, we can’t start thinking about bottom formation.
Conservative investors should continue to follow the Wealth Preserver signals as is proven historically, the signals will protect you from every market crash that matters.
We have seen a hefty relief rally but does Another Leg Down loom? For those who are Wealth Maximizer Pro members, you have caught the nice profitable rally, contratulations.
I am seeing some “disturbing” signs that the market is very close to re-testing the lows that we previously have made, or, will it form another leg down loom?.
At the very least, it is 98% certain we will come to test the lows around 2250 at any moment in time. It is possible that we have another final leg down, and I believe that we likely will.
It is important for you to remain patient instead of panic buying and falling into bull trap.
During this last leg down, simultaneously, Goldand Silverwill likely sell-off for liquidity reasons. People are now and will continue to liquidate their hidden savings.
Here’s why we know that the last leg down is coming:
The VIXremains incredibly elevated (60+) despite big pops in the markets and has not subsided. This tells you another sell-off is looming. Whats more, it’s supported by many other technical and fundamental factors.
For the market to continue up and ignore these factors would be unprecedented.
As always, the Democrats just can’t stand the fact that Trump might take credit for helping people and have blocked and relief package. Democrats claimed in true Marxist fashion in the Senate that the GOP’s push to set aside $425 billion for loans to help select companies and industries, dubbing it a “slush fund” for the Treasury to direct as it sees fit. They said the bill is tilted toward corporations instead of working people. What they fail to even address is that those working people rely upon small businesses the Democrats hate so much which provides 70% of their employment.
Small businesses have been ordered to close down. They cannot pay employees and nobody has suspended their rents. The destruction of small businesses will be devastating to the economy and this is all about playing politics. I am saddened.
The closing for March, if down from last Friday may spark more serious liquidation as Hedge Funds dump everything and some may more to suspend withdrawals as is taking place in European bond funds. The Solus Alternative Asset Management LP, Hedge Fund, known for its investment in retail chain Toys “R” Us, informed its investors that it is shutting its flagship fund and will restrict redemption’s as it works to sell off holdings.
Even Warren Buffett’s Berkshire Hathaway may have lost more than $70 billion on its 10 biggest investments. This type of decline shows that the buy-and-hold strategy fails in a serious market correction. Ray Dalio, who will go down in history for his proclamation that “cash is trash” on January 21, 2020, has lost probably more than $4 trillion in Bridgewater.
Where the 2007-2009 Crash took out Lehman Brothers and Bear Stearns, this time we will see Hedge Funds go down in flames. This undermines liquidity and makes the market vulnerable because market-makers pull back just to survive.
We are headed into a Global Recession which could become even worse than the Great Depression. Here’s why?
This time we have politicians taking advice from the medical industry. The medical people who do not understand that you cannot shut down the economy on this grand scale because of the devastation is insurmountable to people, their jobs, and wiping out their pensions. This economic shut down on such a massive scale is far worse than if the Corona death toll was even 8%.
Never before has the economy been crashing with such speed for this is orchestrated by people who only look at how diseases spread and not how the economy contracts.
Yes, it is true that if we all stayed home we can even beat the common cold. But the post-coronavirus world is going to be far more damaging to the future than any of these people understand.
To have the Democrats playing politics in the middle of the is just insane.
Liquidity is collapsing everywhere. Bank failures rose after the 1929 crash because liquidity failure with a declining velocity = less money with even less money moving around the economy = recession and potential depression.
A monthly closing on Oil below $20.50 will warn of the economic recession ahead as people stay home and this command of quarantine and social distancing may undermine the very cooperation which is the foundation of civilization.
If people are afraid to interact and suspect everyone, that is precisely the atmosphere created by Stalin during the Communist era. We are voluntarily limiting and quickly losing all rights including the freedom of assembly. Even Twitter has shut down those who dissent against the coronavirus and this is calling into question our freedom of speech as well.
InterAnalyst will help guide everyone out of this time of insecurity and political misdirection via selfish ignorance.
Look at the chart below:
Finding The Bottom
As the markets find the bottom, it will be laced with volatility and insecurity with the media frightening you to the point of insecurity. this is not done for YOU as an InterAnalyst member. It is done for those Buy and Holders who never exited at the top and now have been scared into submission.
However, as an InterAnalyst member, you recognize that it likely will become the best entry point of your life! Yes, insecurity will be there but you know the stock market is going nowhere!
The stock market never lies and it always returns when there is “blood in the street” and the bottom arrives.
Thus, follow the guideline to a risky to safe entry back into the coming slingshot move.
Step One: Wealth Maximizer Pro (Daily Charts)
When the Daily chart delivers a green signal, jump for joy, then choose to enter a position or wait to see if the daily signal is holding for a few days for stability. If we are at or close to a bottom, volatility will be very high so prepare for it if you choose to trade it.
Step Two: Wealth Maximizer (Weekly Charts)
When the Daily is followed by a Weekly green signal you know that the economy is attempting to settle and gain strength.
You should begin to feel a bit more secure. Entering a bullish position here is a bit less risky because the weekly signal has some economic strength attached rather than pure daily volatility. You can even wait another week to see if it develops more strength.
Step Three: The Wealth Preserver (Monthly Charts)
Once the Green signal has elevated from the Daily to the Weekly and the Weekly has moved into a second or third week of a bullish trend, you may select to beat the green monthly Wealth Preserver signal by entering a bullish position before month end.
If you look at The Wealth Preserver chart above, ask yourself whether you remember the days or weeks Just prior to the bottom green signals in 2003 and 2008? NOPE, right. You don’t remember them, but what you would have remembered is getting in after preserving your money at the prior top, before the full devastating decline those bear markets delivered.
The same is true now.
So, the bottom is going to come. You must be patient, it will arrive, it always does!
Enter in when you feel most comfortable, but recognize that the Wealth Preserver has proven to be deadly accurate at economic turning points.
The phrase to be true: “Better Safe, than Sorry!”
Obviously, entry at any point has its risks, but as you look closely at The Wealth Preserver chart above, making a move using the monthly charts is rarely a poor decision…ESPECIALLY OFF THE BOTTOM.
This time it is coming with a slingshot.
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