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It’s been a crazy couple of months for the stock market. After falling into the fastest bear market in history in February, the S&P 500 is back near all-time highs. And that’s despite Q1 earnings for the index cratering 66%, one of the worst showings in its history.

For those that are totally confused about the market's continued climb, despite the headlines and negative economic news, please read and take to heart the following quote:

"There is nothing more important to the markets than what the Fed is doing and is going to do. Nothing. This is applicable to both the bond and equity markets and to all classes of risk assets. When you are the only American institution allowed to print money then you are the only American institution that cannot be denied and so today, I focus on what these people are doing."

In 2009 I sent out a newsletter with the following quote: “I have never seen this kind of volatility or irrational activity in 20 plus years." I later went on to mention the "...large one day drop of 4.58%..." My how times have changed, or not!

My first comment certainly holds true today. The daily volatility, which I address below, would have been unthinkable just two or three years ago. And while I do not mean to minimize the seriousness of the corona virus, I cannot call the market reaction rational. 

“Simply put, our economy is strong, unemployment is at a 50-year low, household income is at a 20-year high, consumer sentiment is near record highs, and corporate earnings continue to impress.” www.Zacks.com

Q: So what went wrong?

A: The Coronavirus

The stock market does not like uncertainty, especially uncertainty centers around a question like, “How bad can it get?” More and more experts and market pundits are answering that question with some variation of “Pretty bad?”

Every year it gets earlier and earlier...not when stores start decorating for Christmas, but when the market predictions come out for the next year!

Not to be left behind, I added some of my thoughts to another excellent article by Ellen Chang over at the Street.com. You can read her entire article at: https://www.thestreet.com/markets/2020-stock-market-predictions

According to UBS, the ultra-wealthy hold on average 25% of their capital in cash. Their rationale is that the stock market will see big trouble in 2020. On the surface that seems like a scary warning for the rest of us. But before you make such drastic moves with your portfolio, consider the following:

The free lunch as the saying goes refers to the 19th-century practice in American bars of offering a "free lunch" to entice drinking customers. Obviously, bars weren’t in the business of giving away their food and drink. It simply occurred to them that giving away overly salted food was good for their business! 

One of the “deadliest” sayings in investing is “This time it’s different”. Many investors and pundits, when faced with data contrary to their current views will rationalize a position by saying those infamous words. As they say as well, “history may not repeat, but it does rhyme.” While the big picture may not repeat, policy decisions and market reactions do. Whether interest rates are changing due to inflation fears, a slowing or accelerating economy, macro dollar policy…the results are the same. Fed tightening (rising interest rates) are never good for the market or the economy.

Many people who don’t write themselves, think that writing a few paragraphs on a topic, posting it, and calling it a blog, is a pretty easy process. But as I’ve been a writer for years from everything from a book and to professional publications to many, many blog posts, let me say, it isn’t that easy! Ideas may be many but formulating an idea into a cohesive article, doing research when necessary, and trying to stay timely in our rapid changing (financial) world can be a tough ask.

As we head into the final month of summer, we head into Wall Street’s traditional slow season. Statistically August and September are two of the worst months of the year as traders partake in their annual migration to the Hamptons.  Add in questions surrounding the strength of the economy and be prepared for the “Bears” to come out with their stock market crash predictions.