Unlike anything experienced in our lifetimes

Probably we are seeing the worst downturn since the Great Depression. Retail sales fell yesterday by the largest decline on record. Surely, office going men are not buying any more trousers or suits.

The IMF chief economist, Gita Gopinath summed it up in the best way “the magnitude and speed of collapse in activity that has followed is unlike anything experienced in our lifetimes. This is a crisis where the economic shock is something that is not exactly controlled by the economic policy.”

The way we see it 5% of the companies will thrive because of the situation. Their business models will accelerate their revenue growth like for Amazon, Facebook, Salesforce and Docusign. 30% of the companies will die due to leverage and overhead costs. 65% of companies will evolve, change their business models and adapt to the new world order.

EQUITIES

We are more convinced that the ongoing bullishness is a bear market rally. The coming, down move should be much deeper than what we have seen so far. The mom and pop investors so far has made only incremental changes to their portfolio in March maintaining 55% in stocks and about 19% in bonds. Fidelity investors were buying into airline stocks and cruise ships shares. That shows the retail investors are very complacent and has still not recognized the change in trend.

While prices can still rise to make a climatic top, any price moves below 2710 in the S&P 500 should give us more confidence that a top must have been seen.

BONDS

As outlined before, bonds are still consolidating within a small range. Only a move below 176^20 to 177^20 should support further strong falls but think current consolidation should top out under 182^30.

EURO

There are no high confidence trades on the Euro.

GOLD

The high close to 1748 on Tuesday argues for a significant top. Yesterday’s close just below 1730 is supportive. However, there is chance for one more upward push to complete this bear market rally. Either way, Gold is at or near a significant top.

Be safe. Be small. Be home.

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.