Forget the stimulus and the election. Monday’s (October 19) stock market decline just confirmed last Monday’s ominous double peak. The attitude last week was, “Everything is awesome!” Now comes its antithesis: “Everything is alarming!”
This fundamentally-challenged stock market is ripe for a reset and retest.
Disclosure: Author is fully invested in cash reserves
To understand this stock market’s risk, focus on its uncertainties
In “Stock Market: Here Comes October With Scary Tricks Aplenty,” I discussed the October uncertainties upon us:
“October’s list of potentially negative surprises is long. The month will see the results of…
- The end of some coronavirus shutdown/unemployment protections and benefits
- The end of the summer seasonal spending and employment
- The result of the Fed’s inability to produce real economic improvement (see any of Jerome Powell’s recent pleas to the U.S. congress to do something)
- The flu season joins the coronavirus pandemic
- The wildfire and hurricane seasons continue
- The pre-election, political uncertainties reach a boiling point
- The malaise among banks continues. From The Wall Street Journal article, “Banks Have Lots of Cash, Little to Do With It” (underlining is mine):
‘The banks, a gauge for the broader economy, have signaled they anticipate a longer, deeper recession than they first expected in the spring. Though much of the economy has held up relatively well, the banks say government stimulus and other temporary reprieves have likely delayed the pain, not overcome it. Many lenders are bracing for a wave of defaults.
‘The turmoil has made it hard to see how banks will grow profits, one reason shares have failed to rally along with the market.”
- Finally, there are the earnings reports, leading off with JPMorgan Chase on Tuesday, October 13, at 8:30 am. They should be much better than last quarter, but the hoped-for growth outlooks might be disappointing.
Unfortunately, since I wrote that article, some of those issues have worsened, plus the list has grown to include the following:
- Many companies now are extending work-from-home procedures to summer 2021 (i.e., “normality” is 8+ months away)
- Many companies (e.g., in travel, entertainment and retail industries) are now discussing the coming need to take drastic, survival actions by year-end 2020
- The financial system is showing signs of stress (e.g., the sizeable downside pressure on commercial mortgage loan credit quality and pricing)
- The building realization that technology stocks’ outsized index weightings could be driven more by myopic over-valuations than by extraordinary growth…
Go to the news source: This Is Not A Stock Market Dip – It’s The Beginning Of Another Scary, October Se…