The stock market is interesting these days. Today is seeing the same as we saw the last few days. There are big moves with lots of volatility.
Earlier this week, the U.S. Federal Reserve lowered interest rates by 50 basis points. This is a move the market always loves since it is addicted to cheap money.
Last night, Joe Biden has a good night in the primaries. Super Tuesday was super for Joe. Here too, we see the market liking it, especially healthcare stocks. The market feelings on Biden are secondary to their fear of Bernie Sanders.
Sanders' promise of bigger government and regulation is what haunts the markets. They feel a Sanders' victory would lead to anti-business regulations which would ultimately harm the market.
It is amazing how the story line can change when it comes to the market. Last week, it was all coronavirus. This week, it is as if a cure was found. It is hardly registering on the market psyche.
Of course, this is why short term moves in the market should be ignored except for traders. The virus is far from conclusion and the economic impact is hardly been uncovered. It is going to take at least one earnings cycle before we realize what is the effect of all of this on the global economy.
Supply chain disruptions are just starting to be felt. Tesla was reported to ship some Model 3s without the autonomous driving hardware, a move they blame on supply chain issues. In fact, the entire automobile sector, which was struggling for a few years, is being affected. General Motors is reported to have flown in parts to keep production going.
With economists lowering GDP forecasts due to the economic impact being felt from the shutdown, it is smart to tread very lightly. Up days in the market can be misleading. "Dead cat bounces" have sucked in a lot of people over the years.
For now, the market is flashing green. Participants are loving that but there is still a lot out there.
Until the full economic impact of the virus is known, I do not think the bull case can be long lasting. The news cycle has a way of isolating the negative and highlighting it. Even if it is not as bad as predicted, sensationalism is what they are after. This, unfortunately, can affect sentiment.
So tread carefully.
As always, this is not financial advice.*
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Posted via Steemleo