Rallying Things Into Perspective

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So far, what we know:

• The U.S stock market hit a new all-time high mid February (S&P 500 being 3386).
• Covid-19 made markets take a turn within 5 weeks. (S&P 500 being 2,237)
• That low was reached on March 23.
• March 23 is also the day the Fed announced their response, by purchasing securities to support ‘smooth market functioning’.
• Today, the stock market has recovered at a remarkable rate.

What we do not know:

Everything else.

Everything is uncertain at the moment:

• Why valuations are high despite everything still happening?
• Is over-optimism from the consensus driving the market?
• What happens when the Fed stops feeding?

I’ve noticed many traders tend to focus on predicting the future. News on a company gets published and traders pull out a crystal ball, contemplating whether they should make puts or calls.

Put the present into perspective instead.

The world was hit with a pandemic and suffered fat economic declines. The Fed did what they could do to prevent a depression.

Though the virus is continuing, the stock market has risen to points in time we were all happy, prior to Corona

(and Kobe).

Your agenda during a time like this is being cautious. Avoid simple approaches and carefree spending with an unstable economy. Times like these require connecting dots, not collecting them.

Don’t be one of those who say “it seems intimidating but it’s not”.

There will be times you disagree with me. That’s fine. These memos are a way for me to understand nuances about the market and share them with you.

These memos will not be pulling out my crystal ball and writing:

Buy put options on Zoom because they’re zooming.

Instead, it’s rallying things into perspective on uncertainty and how to deal with it.

Not predict it.