Dear Reader,
It seems we are in a second wave of the coronavirus disease COVID-19 globally. This time, however, economic shutdowns will be much harder to swallow for the general public, which has been hurt a lot by the recent economic crash.
How will stocks react to the COVID-19 second wave? Naturally, the main US, European and Asian indices will fall. There will be winners, however. A natural winner seems to be Zoom Video Communications, the now ubiquitous video conferencing application that will be used more and more during a pandemic.
Cyclical stocks like oil and mining exploration and production stocks could again be hurt horrendously. Industrial stocks would also suffer in the coming economic slowdown. Some technology stocks like Microsoft and Amazon will be hurt less and may even rise as they did in the last 5 months, despite the eruption of the coronavirus. Retail and groceries stocks like Walmart and Costco will also perform relatively better than the global stock market indices.
Interesting case are gold mining stocks. I think gold for sure will rise during the second wave of the coronavirus in search of safe heaven demand and money printing by central banks. But gold stocks are also generally related to the overall level of stocks. So between these two counterbalancing forces I forecast the rise of gold price will win out and gold stocks could prove winners in the second wave of the coronavirus.
In general, I think we are in for WW , two W-s shaped economic development. The general economy and the main global stock market indices will rise and fall again and then rise and then fall again until a vaccine or very successful medicine for coronavirus is developed. So, basically now is the best time for relatively short-term trading strategies - picking tops and bottoms.
Disclaimer: The blogposts and comments on this blog and posts on social networks(Twitter, LinkedIn, Facebook etc.) are not investment recommendation, are provided solely for informational purposes, and do not constitute an offer or solicitation to buy or sell any securities. The opinions expressed on the blog are Petar Posledovich's. Petar Posledovich does not guarantee the accuracy of the information presented on this blog and social networks. The information presented is "as is".
Petar Vladimirov Posledovich is not liable for any investment losses incurred by reading and interpreting blogposts on this blog and posts on social networks.
Conflicts of interest: I may possess some of the securities, currencies or their derivatives mentioned in the blogpost and posts on social networks(Twitter, LinkedIn etc.)!
Respectfully yours,
Petar Posledovich
2 comments:
I went long a gas company. Ray Dalio is right. Cash is trash.
We need to think where the whole thing is going. Cash is going to be devaluated, because the debt levels are unsustainable. In fact it is already in a devaluation phase if we look at the bull market in precious metals, which is at its final stage already, once gold crosses 2000 USD, which will be sooner rather than later.
The best time to buy stocks is in a bear market. If the PE ratio is low enough, then we need to buy a business at some price with a good cash flow to protect us.
It is always better to hold a well known business (royal stock analysis) at a reasonable price (low P/E ratio).
It is better to hold a stable global business than a piece of paper in your hand.
Unfortunately people do not like stocks, because most of them do not understand them.
They think a bank deposit is not risky. The probability of bail in (taxation, tax on the deposit profit) or bail out (inflation) is 100%.
Salary is earned with almost 20% tax, when you include social security. If you decide to spend the money you have another 20% VAT. So 40%.
If you invest in home equity your cost is about 9%, deducting 10% of profit, if you do not spend.
If the stock pays you dividends, tax is 5%, roughly 8% with commissions and paying the custodian.
Rich people hold their money machines - real estate and businesses, incl. stocks.
They pay less taxes.
When central banks print, just hold a portfolio of some real assets and stocks, anything. The probability of being wrong is inversely related to probability of currency devaluation.
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