Pre-Market Note

Equity futures saw violent swings between green and red on the 6.6 million jobless claims number released this morning. 

Simultaneously, the Fed announced $2.3 trillion in fresh liquidity for small business loans, municipalities, and the credit markets. The shocker, although perhaps it shouldn’t be, is that they’ll now be buying corporate bonds downgraded to junk after March 22, as well as junk bond ETFs. Have to wonder if stocks aren’t next, if/when (given economic reality, virtually have to presume it’ll be ‘when’), we test the lows.

As I type, the Fed-news has the bears conceding ground; Dow futures are up 450. Makes sense given trading action of late, as well as the market-dynamic of the past 11 years (trouble arrives, stocks selloff, Fed steps in, stocks rally).

Of course the multi-trillion dollar question is, amid what’ll be the worst recession since the Great Depression, will Fed, and fiscal, intervention save stocks from their third -50% bear market experience in a row? The question of course begs a ‘no’ answer, but then again, stimulus measures this go-round come with zero limits.

Price action the past few weeks suggests that those who’d answer ‘yes’ seem to be winning the battle. But as I’ve been illustrating herein, the latest action remains consistent with the character of bear markets past.

The IMF warned this morning that next week’s global outlook report is going to be “grim”. Of course that’ll come as no surprise to anyone. 

Despite the classic bear market dynamic that appears to be playing out, stocks only down in the teens at this point is, nevertheless — given economic reality — amazing.

We’ll be managing our way out of SJB (short junk bonds) this morning…


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