The novel coronavirus brought on stock market conditions I didn’t think I’d get to see. Along with violent markets came violent emotional responses.
After closing at 3,386.15 on February 19th 2020, the S&P 500 (GSPC) dropped 35% and hit a low of 2,191.86 on February 23rd, 2020. Since then, the S&P 500 has rallied 35%, and now sits only 13% from all time highs.
My profession allows me a unique insight into sentiment among mass-affluent Americans from virtually every (mass affluent) background. Everyone is bearish right now. Semi rich, very rich, young, old, democrats & republicans on both coasts, nearly everyone I speak with is convinced that markets have overshot to the upside and now it’s time to be conservative, or straight bearish.
There was a lot more dispersion of opinions around the March 23rd low. Most of my younger clients were adding money and the older ones were trying to batten down the hatches on their portfolios. Now, no one I speak with is convinced now is a great time to add money or be more aggressive in stock markets.
I’m also bearish right now, and it’s scaring me. I’m a staunch contrarian. I can be comfortably different for a long time. Why do I agree with everyone now? This is a circle I cannot square. Typically I’d take this sentiment as a signal to buy stocks hand over fist, but this time I cannot bring myself to do this.
About half of my clients have taken pay cuts, been furloughed, laid off, or their spouse has. Some are doctors, veterinarians, computer programmers, marketers and salespeople. Many of my friends have been affected too. I can only think of a few people who haven’t been adversely affected by this.
The reflexive nature of this brief economic freeze is going to have severe and lasting impacts.
I’m confused as to why the market is only 13% off highs but I’ll be damned if we’re all correct.
Disclosure: I’m ~75% net long.