Main Street Reopening and Wall Street Key Levels
Markets tested and moved above significant psychological levels yesterday. The level at 25,000 in the Dow and 3000 in the S&P 500.
We have been alluding to the importance of 3000 in the S&P 500. It is the 200-day moving average. The 200-day moving average is particularly important for most liquid markets. It acts like a dynamic trend line. Most market participants believe that it is a fair place to settle major transactions.
Significant closings above the 200-day moving average is akin to crossing the Rubicon. During the uptrend, the market bounced off the 200-day moving average many times. So, if you believe as we do, that the market is in a down trend then we should top out somewhere here soon. I will have more details with technical and sentiment details tomorrow. Gold is getting interesting as well. Now let us turn to turn to matters that put us in this crisis.
From a media perspective, it seems that the psychology of fear that has been gripping the country over the last two months could be worse than the virus itself.
But that is not what most of the surveys are saying. Consumers currently are more optimistic than they were at the weakest points in the Global Financial Crisis.
Warm weather and a lot of sunshine itself changes the moods of people. Summer and humidity are the biggest enemies of COVID-19 and it is consistent with the declining new cases and deaths. With over a month of some state reopenings, there are no spike in cases, and more importantly there is continued decline in death rates. The best guess scenario is showing a case fatality rate of 0.4%. The worst was 1% of cases and the best case could be a case fatality rate of 0.2% much smaller than what was originally projected.
But we are going to see big changes globally as the economy reopens further in many places. Organizations and companies will be doing things much differently from before.
The floor of New York stock exchange (NYSE) opened for the first time yesterday since the lockdown. Only about 25% of traders were allowed on the floor. All are required to wear masks. They are restricted from taking public transportation. Plexiglass barriers segregates the people. Wait for the most important part.
None of these processes can be complete without a legal agreement, especially in the US. Everyone has to sign a liability waiver. Basically, you cannot sue the NYSE for any personal damages.
Most companies, clubs and organizations will enforce liability waivers as an added layer of protection.
But it can even get comical like how a man is facing a $7,300 fine for wrestling with a bear at a Polish zoo and breaking COVID-19 rules for not wearing a face mask.
Abraham George is a seasoned investment manager with more than 40 years of experience in trading & investment and portfolio management spanning diverse environments like banks (HSBC, ADCB), sovereign wealth fund (ADIA), a royal family office and a hedge fund.