Alchanati Campbell & Associates
The Senate and the House both voted to pass the $2 trillion stimulus bill. In the short-term, this stimulus will help the corporations, small businesses and individuals who are in need of money. It may help alleviate the lost revenue and damaged balance sheets in the short-term, but there will be huge ripple effects do to the unknown consequences. What happens when $2 trillion+ is printed and added to the US deficit? What will happen to inflation? What will happen when people realize they get paid more for not working? What will happen when the Feds have their printing machines constantly on?
Consumer confidence is down meaning they will stop buying goods and services. Consumers will stop spending money due to: a) the inability to buy due to the nationwide quarantine, b) the inability to buy due to being unemployed, and c) the shift from spending and investing to saving. Once they get free money (helicopter money) from the government, it won’t be used for investments and other spending. It will be used for the essentials of survival. And for the landlords’ sake, hopefully rent.
Earlier this month we experienced a liquidity shortage, tons of volatility, and forced selling due to a leverage unwind. Today, we see all asset classes fluctuating in confusion (USD, gold, silver, Bitcoin, public equity, treasuries).
You can trade the Market short-term by having open positions capitalizing on the highs and lows by shorting and buying short-term option calls/puts, but the store of value now are in Gold, Gold miners, and cash.
There is a tug-a-war between the Feds providing trillions of dollars in stimulus and asset purchasing and the virus spreading faster and more people dying/staying out of work and being unemployed.
In the short-term, massive amounts of outflows will continue and we will see short-term rallies and declines. Once the trillion dollar stimulus begins to distribute to its specified parties, we can see some more upside.
In the medium-term, we will enter a recession and we will see more downside. The virus is spreading faster and damaging more than people’s expectations. Fear will spike and chaos will erupt.
In the long-term, we will see ripples of the virus for years to come.
The Alchanati Campbell and Associates Team
WHAT'S UP FRIDAY? is a weekly newsletter that will give you a summary of "What's up?" on Wall Street, in the US and around the World written by The Alchanati Campbell and Associates Team. What makes us unique is we focus on long-term knowledge; knowledge that will still be useful to you 10 years from now.