Easter Covid 19 Update 7
Happy long week-end...just what we all need, even more time at home! So what really happened during this recent volatility? Here are a couple of explanations as to why the typical bond fund safety theory was blown out of the water. The Bank for International Settlements has put out a fascinating report on events last month. These are the key takeaways:
And from Noah Blackstein at Dynamic: March was historic for many reasons but the investor stampede out of fixed income was unprecedented. March saw $284bn leave bonds, close to $658bn go into cash, and a fairly tame $64bn came out of equities in comparison. The largest part of the bond capitulation was in investment grade bonds which lost $156bn according to BofA Merrill Lynch. This coincided with a significant breakdown in historical cross-asset correlation between equities and bonds, culminating in the worst performance of a traditional 60/40 balanced fund in the last 30 years.
Suffice it to say, even if you owned bonds you were hurt in this once in a lifetime nightmare of a market.
My recycling bin and those of my neighbours is not as a full as usual. So that's a good thing right? At least for the environment. It's a bad thing for markets however. We are consuming less therefore company earnings will be less therefore markets will be lower. How low? Are we already there? Most say no. BULL MARKET??? We have technically gone back into a bull market, defined as a 20% increase on recent lows. We've also had 3 straight days of positive performance. On another positive note the US is considering testing and opening up smaller areas throughout the country that were not hit badly by the virus. I THINK that is a positive note. SELLING MY LOSSES?? If you are anything like me you don't like to sell something that is in a loss position. And there are many of us out there. I will pose a single question to help you re-think that. What if the alternative option has a much better upside than what you are currently holding at a loss? FLASH-TRADING? AI QUANTS? And if you are frustrated trying to understand the workings of the market...even the experts agree....most of this is in english: "we are finding it increasingly difficult to employ a “value” strategy in a market dominated by passive fund flows, algorithmic trading, momentum trading, AI quants and flash-trading." And from Bloomberg - The Listed League Table A table published in the Seafarer Funds’ Prevailing Winds blog caught my eye. These are the world’s top 10 countries, as ranked by number of listed companies with a market cap of $500 million or above, as of the end of last year.
Happy Passover. Happy Easter. Be Safe. Stay Sane!