The Normal Attraction is Strong
This morning we are seeing a bounce back of almost half of yesterdays market move. The manipulators still have home field advantage, but we are still in the first inning.
A Sad Time for America
The lack of an organized approach to the COVID 19 pandemic will prove to be tragic. Just driving around the Chicago area and suburbs it is striking that there is little use of distancing and masking. Without a strong message from the Whitehouse each of us have to run our own program for safety.
As I have pointed out at length, the desire to get back to normal in the midst of huge Macro change is strong. The new economy will not be able to support 85 % of the workforce in a service occupation. Things are going to have to change, a lot of re-education and implementation will be required.
Looking at the Macro Trade
It might be beneficial to breakdown the four parts to the trade in detail.
- First the easy part of the trade is long 20 year bonds, that is because the Fed is at your back.
- The rest of the trade is more difficult because the administration is fighting you all the way with various ways of trying to thwart the trade. Trump still believes that having a strong stock market is key to his re-election and has Mnuchin running various programs, buying junk bond ETF’s and continual jaw-boning. So short stocks based around a weak economy fueled by a poor COVID management will be difficult but is the central factor.
- Long Gold is also a difficult part of the trade. Global Central Banks want to keep gold under control and consequently keep panic at bay.
- And then there is the short oil part, again the Administration and OPEC have a strong need to keep oil prices up.
In Spite of all of that..
Even with stocks sharply higher this morning, and bonds backing off a bit, we still see this stage of the trade from last Friday’s turn point, with 13 % profits in one week.