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Future of financial markets from Fidelity

Sven
in Other Investing
Jurrien Timmer is the director of global macro in Fidelity's Global Asset Allocation Division, specializing in global macro strategy and active asset allocation. In this article, he presented a balanced analysis on the future direction of the global market.
Key takeaways
The big questions are when will the growth rate of new COVID-19 cases peak and will the fiscal and monetary policy response be enough?
The significant drop in the stock market has been made significantly worse by the oil price war between Saudi Arabia and Russia, as well as forced deleveraging and a soaring dollar.
Earnings estimates for the next few quarters tumbled last week, and will likely fall further in the coming weeks.
While further US stock market declines are quite possible or even likely, my technical work suggests that the momentum of this decline may diminish in the weeks ahead.
https://fidelity.com/learning-center/trading-investing/markets-sectors/stock-market-drops-2020

Comments

  • catch22catch22
    Thanks, Sven
  • Sven
    Hopefully this put some context on the eventual recovery. Certainly this will not be a V-shape recovery.
  • Old_JoeOld_Joe
    More like a roller-coaster shape, most likely.
  • FD1000
    I "love" the conclusion
    My conclusion from all these indicators is that, unless we are heading into another Great Depression (unlikely in my view with $4 trillion of helicopter money on the way), these extremely negative breadth readings are more consistent with a market in which the bulk of the declines have already occurred, as opposed to one where they are yet to come. That doesn't mean the lows are in by any means.
    He just stated the obvious, after a 35% decline in the Dow, it's highly likely "the bulk of the declines have already occurred" and just to cover his AXX he added, "doesn't mean the lows are in by any means." :-)
  • beebee
    This excerpt seemed worth noting:
    My back-of-the-envelope calculation shows that a 60/40 stock/bond portfolio in mid-February has now become a 51/49 portfolio, entirely on the basis of market action. This is very large drift in a very short time. Given the many trillions of dollars in assets that follow some sort of multi-asset class approach, the coming rebalance could well be in the range of a few hundred billion.
    Automatically re-balancing (selling bonds that appear to be getting hammered right now as well) doesn't seem so helpful to one's portfolio.
  • FD1000
    bee said:

    This excerpt seemed worth noting:

    My back-of-the-envelope calculation shows that a 60/40 stock/bond portfolio in mid-February has now become a 51/49 portfolio, entirely on the basis of market action. This is very large drift in a very short time. Given the many trillions of dollars in assets that follow some sort of multi-asset class approach, the coming rebalance could well be in the range of a few hundred billion.
    Automatically re-balancing (selling bonds that appear to be getting hammered right now as well) doesn't seem so helpful to one's portfolio.
    In the article, he talks about government bonds which are usually Treasury bills, (there are Treasury notes, and Treasury Inflation-Protected Securities (TIPS))

    For YTD treasuries are up nicely. IEI(iShares 3-7 Year Treasury Bond ETF) is up 5.5%.
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