During the week of the bull runs in Pamplona, every morning a group of bulls are let loose to run through the streets. The closer they get the louder get the yells of “Toro” (Bull). The Sound of Toro is a warning: know where the bulls are coming from and find shelter or a clear quick path to safety.
This week the Bulls arrived on Wall Street. Bull and Bear are stock market slang for those who expect the stock market to go up and down, respectively. Just after a very quick plunge into a bear market, we have had one of the best weeks in decades. Toro! Toro!
What has changed? A two trillion dollar stimulus from the federal government was announced, a huge action that is certainly capable of moving markets and hopefully sustaining the economy for as long as it takes. But its not going to stop the trend in Corona Virus infection and of overwhelmed hospitals. This month more that 3 million people lost their jobs. Jobless claims are expected to be as high at least for the next few weeks.
Beside the hope from the stimulus package there was a logical explanation for this week’s bull market. A lot of the people who had bet that the market would go down by borrowing stock and selling it(short selling), cashed in by buying it back. Additionally, the big funds who have an allocation of bonds and stocks (some of your savings may be included) were rebalancing back to their original allocation which they typically do on a regular basis, this time however was a particularly large purchase of stocks.
Once the shorts have been covered and allocations been reset, where will the bulls be?
In Pamplona, the bulls are penned up after they run through the streets. In an ideal world they should be allowed to run free to the city limits and beyond. The Wall Street bulls won’t be free to run until we know a lot more.
This is a global problem; everyone will be affected. The unknowns are still more than the knowns. How long before the virus is contained, will there be a second wave, when will the general population go out and spend like we were a couple months ago, how many people and companies will default on loans, when will companies start to buy back stock again, when will taxes be raised (someone must pay for the stimulus)? These are just some of the questions that need to be answered. The smart bulls aren’t charging, they are out grazing.
Again, keep nibbling on your choice of stocks, exchange traded funds or mutual funds. Allow your buying potential to last as long as it takes this medical and financial crisis to play out. There are bound to be aftershocks for some time to come.
P.S. On a related note for as long as I’ve been paying attention, I have been able to predict when I will get sick with a variation of the seasonal virus. Each time I’ve gone through a period of chronic stress and or days with poor sleep I have gotten sick within a few days. I’ve also noticed when reading about some of the worst virus’s like Ebola that many lives would not have been lost had they had access to drinking water. Sleeping and drinking are a powerful way reinforce our immune systems, our last stand against all those ill’s patrolling the surfacephere.