Have We Hit Bottom?

On April 1st 2020 the Dow completed its worst first quarter in 124 years. You needn’t have been a fool to lose significant money (the Gabriel fund profited 11% the first quarter 2020). The market remains overvalued, and I anticipate the S&P 500 will revisit March’s low around 2200. The model is Bearish for April 2020.

Calling a market bottom is very difficult, and the S&P 500 is up about 13% since March 22nd 2020.

Source: Yahoo Finance

This resurgence is in response to the federal reserve lowering interest rates to 0%, and a historically large economic stimulus plan. While both of these are bullish, consider market valuations. The last time market valuations were as high as recent (Buffets Ratio reached 155% in February 2020) was prior to the Dot.com Crash (Buffets Ratio reached 150% in January 2000). Buffets Ratio dropped to 71% before the market hit bottom in 2002. Currently Buffets Ratio is 113%.

Source: GuruFocus

I expect Buffets Ratio and the S&P 500 to continue to head lower in this Bear Market.

Also consider that experts predict the Coronavirus outbreak to peak mid-April, and economic data will begin reflecting the enormous recessionary impact of the virus. Both of these are very bearish, and it will be difficult being bullish before new cases of the virus peak.

But there is light on the horizon. Factory activity is already expanding in China (the Gabriel fund recently increased its investment in MCHI), and barring additional economic shocks we anticipate the U.S. economy following a similar recovery within the next several months.

This report reflects the current opinion of the author. The report is based upon sources believed to be accurate and reliable. Opinions and statements about the future expressed in the report are subject to change without notice. The report is not a solicitation or an offer to buy or sell any security.

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