Besides, of course, the crazy market volatility, a fair amount of press attention has been focused on the actor Tom Hanks, his wife Rita Wilson, and their experience with the coronavirus. There’s a reason for that: Hanks is in the high-risk group – 63 years old, Type 2 diabetic. But now he’s recovered…and it gives a lot of people hope that they would, too.
People have also certainly welcomed the news that the Trump administration is working on fiscal stimulus (in addition to the monetary stimulus already announced by the Federal Reserve). The result on Wall Street was a nice bounce, with the S&P 500 up 7% at today’s highs.
Now, when the market drops and bounces like this, it tends to oscillate from there. That’s fine. But here’s what I want to see going forward – and what I don’t.
As far as our national isolation is concerned, I keep hearing that the next 15 days are critical, we’re all supposed to self-isolate, etc. In my experience, Americans are very, very angry about that. In Ithaca, New York, for example, where my daughter is a student at Cornell University, the college evacuation is really hurting the local community. So, we’ll see how long we can do this.
Going on unemployment for two weeks is one thing; going on unemployment for several months is another matter. So, I think there’s going to be a big blowback.
Other consumers are going to ultimately have money in their pockets from lower gas prices – and a lot will go stir-crazy…so hopefully they’ll keep spending in certain parts of the economy.
There’s going to be tremendous pressure for folks to get out and about. We’re watching what’s happening in Europe…hopefully their problems will start to ebb over there; that’ll give us hope and relief.
When it comes to our investments, we have to now look forward. We have to make sure that the bargain hunting commences. I’m very happy with how many of my stocks bounced this morning. But we have to have it feed on itself. I maintain that dividend stocks will need to lead us out of this market.
Yes, none of us enjoy these technical sell offs; no one enjoys panic selling. It’s been very, very painful. But for those throwing in the towel, here’s the ultimate irony: The S&P 500 now has a dividend yield of 2.98%. The Dow Industrials now have a dividend yield of 3.98%. Even with Treasury yields back up in today’s market rally, the 10-year is going to pay you less than 1%. Stocks are going to yield more than anywhere else you can go.
I’m going to be very curious about the quarter-end window-dressing that commences this time of year; I’m going to be very curious about the last day of March, when ETFs rebalance – I’m expecting a nice pop from that.
And I’m watching the analyst community like a hawk, trying to verify: Are they going to be cutting? I have a lot of stocks that are looking pretty good right now. So, I’m expecting a huge rebound. Just hang in there, because as I always say, good stocks do bounce.
Just be careful about your timing. You can see there’s a lot of selling pressure at the close that comes from the ETF industry. There were some ETF pricing issues with widening spreads yesterday. That just undermined confidence. But the truth is, now there’s bargains out there.
On the flip side, if anything doesn’t bounce, or gets too volatile, I will be selling it. It’s very fortunate that earnings season is about to commence. If, like me, you’ve been focusing on companies with good fundamentals, you should be able to sell stocks into strength if needed.
Until then, let’s try to enjoy the family time that many of us will have in the next couple of weeks. Hopefully, our worldwide/national nightmare will be over shortly, and we can all get back to normal.
The key is, we need the volatility to drop. Instead of 10% a day, we maybe need 5% a day. And with bond yields so low, dividend stocks can continue to feed on themselves. That’s, again, what we need to pull out of the situation we’re in – and we’ll never get a buying opportunity like this ever again.