Hello, I’m Ken Moraif, and this is the weekly market alert video for the week ended June 26, 2020. And, Friday was a big down day in the S&P and the Dow and the market. And perhaps, the gravity is starting to actually work where bad news from the economy is actually being listened to by the stock market. It seems to have gone up with no regard to anything. So, let’s go over what happened last week and where we sit.
So, as you may have noticed, the unemployment numbers came in worse than expected. We have an increase in the number of infections, and hospitals’ ability to handle that is starting to appear to be impaired. And so, we’ve had open states that are now slowing that down or reversing. So, the idea that we’re going to see a rapid recovery in the economy and a rapid recovery in profits and all of that is now starting to be questioned. And, we believe that we’re going to see a retrenchment in the markets because of that.
The thing that makes it very difficult for us in terms of managing our clients’ money is that there’s a relatively new player in the game, and this player is young. The average age is 31. And, this player doesn’t care about fundamentals, it appears. I’ve described this young person. And, there’s several apps where you can go in and essentially invest, almost like gambling. They’ve gamified investing and turned it into almost like gambling. And so, these people are investing, I should say gambling, and betting up the prices of companies that are bankrupt. Their stock is worthless, but yet the price just keeps going up. And so, this kind of thing is reminiscent of Y2K when people were investing in dot-coms because they just had dot-com on the end of their name. And, it didn’t matter whether they had profits or not. That was irrelevant. And so, because of that, we’re concerned that this is potentially a bubble, also.
The problem though is, how long does it go on before the bubble bursts. And, we think it may go on until the elections, primarily because the politicians all want to be reelected. And so, we find it difficult to believe that they’re not going to re-up the unemployment benefits and the extra stimulus and all those kind of things. The Federal Reserve is also saying they’re going to buy out pretty much the entire universe if that’s what it takes. So, there seems to be no limit to how much money’s going to be thrown into all of this to keep it going despite the fact that maybe companies are going to be gone, or jobs are going to be gone forever. Microsoft announced that they’re going to close all of their retail stores forever, so those jobs will never come back.
So, we don’t think we see this as a V-shaped recovery. We think that this is more going to be like a square-root recovery where you have the down, the up, and then it kind of settles at somewhere below where it was before. And if that’s the case, then right now, this market, we believe, is very highly priced. And so, there’s downside risk. Having said all of that, we still are moderately bullish through the elections, so we’re considering the possibility that we may add to our equity position. But we’ll have to visit that in early July when we have a little bit more information.
So, for right now, the word is caution, the word is stay scared. But on the other front, the word is stay healthy and stay sane. Do not take this virus for granted. Don’t give up any of the practices that you have been using. Be very, very cautious and do everything you need to stay healthy. Alright? So, thank you for watching this video, and we’ll talk soon.