Perspective Is Everything

Posted | 10/11/2020 / Views | 1791
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News flash… Everything is awesome! News of Pfizer’s vaccine saw the S&P500, Dow and small cap Russell 2000 all hit all-time highs last night whilst gold, silver and bonds got smacked.  Gold was down around 4.7%, silver just over 6% whilst Bitcoin held strong. 

In all such ‘news’ related market moves, perspective is everything.  First, lets look at that gold price.  Its still up 18% this year…

Perspective Is Everything

And silver, still up 30% this year or 60% if you bought the dip in March…

Perspective Is Everything

 

Yesterday we wrote to the already sky high valuations and other metrics indicating US shares are due for a big correction.  Last night they surged again on news of a vaccine that is still in preliminary stages and won’t be available until later next year whilst a massive second wave sweeps the world.  And so by contrast we have the S&P500 up just 9% for the year but more importantly, forming a technical ‘megaphone’ pattern that doesn’t bode well:

Perspective Is Everything

This market euphoria on a news soundbite misses the reality of both the risk of success and the time to get to market in a world already strung out.  That said, as the charts above demonstrate the moves aren’t that big in context and the news is potentially a great step forward.  Bloomberg put it into perspective:

“The Pfizer-BioNTech vaccine won’t be enough on its own. The companies have a deal with the U.S. to provide 100 million doses, plus as many as 500 million more. That’s likely enough for most of America, but certainly not the world. And the doses will take time to produce. Even if other makers generate their own positive results, the Covid-19 pandemic will last well into 2021 for most people in rich countries, and perhaps far longer for those in poorer ones.

In the U.S., a tough winter is ahead. On Monday, New York Mayor Bill de Blasio said the city is coming “dangerously close” to a second wave of infections, after this spring becoming the worst-place hit on the planet and losing thousands of residents to the virus. Around the rest of the country, cases have been hitting new daily records. 

“We are entering the hardest days of the pandemic. The next two months will see a lot of infections and deaths,” Ashish Jha, the dean of Brown University’s School of Public Health, said on Twitter. But, Jha added, “There is a light at the end of the tunnel. Today, that light got a bit brighter.””

And so let’s hope this is a sign of things to come for a vaccine but not lose sight of the already entrenched economic realities of record high debt, record highly overvalued equities, a record pace of currency debasing stimulus, and a broader economy that was moribund BEFORE the pandemic that may or may not be about to be treatable.  As with assessing last night’s markets, balance and diversification is everything.  If you are long term holder, today may be nothing more than an excellent dip buying opportunity.

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