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Bull Vs. Bear: Is The Market Headed Higher, Or Due For Another Collapse?

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Market Collapse Continues Despite “Monetary Bazooka” From Fed, Rates Cut to Zero

With the stunning collapse of the stock market due to the coronavirus pandemic overshadowed by the equally-stunning rally since the March 23 lows, a heated debate has ensued.

Has the Federal Reserve and Treasury pumped enough money into the market to keep it afloat?

Or, just like every previous market collapse, will we retest the lows before finally entering a recovery?

Here are both sides of the argument. Take each into consideration. Then, let us know in the comment section below the article which camp you fall into. Are you bullish on the stock market and believe the worst is over? Or are you bearish and think there’s more pain to come?

Bulls (Rise):

David Kostin, Goldman Sachs analyst:
“If the U.S. does not experience a second surge in infections after the economy reopens, the ‘do whatever it takes’ stance of policymakers means the equity market is unlikely to make new lows.”

Gibson Smith, founder of Smith Capital:
“The Fed has really pulled out all stops in terms of keeping markets liquid and fluid. My expectation is over the next three to six months, assuming we get the virus contained … we’ll look back on this period of time and realize it was just a moment in time with a lot of volatility and we probably have better times in front of us than worse times.”

Marko Kolanovic, JPMorgan analyst:
“Unhindered by moral hazard, the response of fiscal and monetary authorities is and will continue to be unprecedented, with the goal of essentially making everyone ‘whole.’ We believe the significance of this development is underestimated by markets, and this reinforces our view of a full asset price recovery, and equity markets reaching all-time highs next year, likely by H1.”

Mike Wilson, Morgan Stanley analyst:
“Our base case is that the market already had its successful re-test the week of March 30, meaning that week’s lows of 2,450 should not be challenged again, especially with the extraordinary action by the Fed since then and flattening of the curve on COVID-19.”

Bears (Collapse):

Mark Mobius, founder, Mobius Capital Partners:
“Although there are some opportunities to buy, I would say it’s probably a good idea to keep some powder dry for another downturn,” he said. “We might see a double bottom.”

Michael Lee, chief strategist at Michael Lee Strategy:
“We are in a situation now where the technical and the fundamental are going to collide perfectly in what we’ve just seen, I believe, is a bear market rally. We saw several runs in 2008. We need to test the lows.”

Masanari Takada, analyst at Nomura Securities:
“The present rally should best be viewed as an unenthusiastic, inorganic bear market rally.”

Matt Maley, chief market strategist at Miller Tabak:
“This is more a bear market trap. I just think we’ve had a first period of liquidation. But I think we could have more of it.”

Lori Calvasina, RBC’s head of U.S. equity strategy:
“I’m concerned that we have not seen the lows yet. This surprisingly high level of bullishness supports our own view that we haven’t yet seen investor capitulation, echoing what we’ve seen in other data sets. We view capitulation as a necessary, though not sufficient condition for stock market bottoms in major drawdowns.”

Based on these arguments, which way, then, do you think the market is headed? Do you think the market will collapse again? Do you see light at the end of the tunnel?

Let us know in the comments below, and we’ll post your responses in a future article here on The Capitalist.

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