Last week I wrote "Panic Goes Viral". I was premature in viewing investment opportunities as I had no idea that the panic over the last few days was simply a precursor to this weekend's broader selloff.
Over the weekend one old Black Swan (coronavirus) and a new Black Swan (substantially lower energy prices) joined forces in the pond as the collapse in yields and energy prices are serving to crater global equity markets this morning.
In scope and rapidity, the accumulated declines in bond yields and stock prices are unprecedented.
Remarkably, it was less than four weeks ago that The Goldilocks market was in place. TINA ("there is no alternative") was the watchword of market participants' faith.
An evolving and vulnerable market structure has importantly contributed to these rapid price declines and the consequent fallout is unknown and worrisome.
The Administration, our political leadership and The Federal Reserve will be put to the test over the next few days and weeks. Arguably (sadly and frankly), it remains my view that these bodies (which have not delivered a steady hand and assurance in time of current developing market and health crisis) may not be up to the current task. Unfortunately, I am not optimistic that they have the fortitude, experience, creativity and intellect to deal with the market and economic challenges that lie ahead. Stated simply, the captain, managers and the bench consists of a number of subpar players that seem more beholden to optics (and reelection) rather than policy - dangerous in a world that has grown flat, interconnected and networked.
An evolving market structure, dominated by products and strategies that know everything about price and nothing about value, will now be tested.
There will be enormous fallout where large bets have gone wrong - ranging from bond, equity, commodity and VIX positioning.
Fortunately, markets, over history, have a way of clearing price and returning to intrinsic value (even while the country's leadership is foundering) - setting up for better times ahead even as those around the markets are losing their heads and may be ill equipped to respond responsibly and, again, without a steady and thoughtful hand. The same observation applies to the global economies - growth resets lower and, ultimately, resumes its trajectory of growth.
So, while our leadership lacks and structural market risks are being exposed, the market opportunities may soon become deafening. But, as fear and panic have so quickly replaced complacency, few will have the guts to capitalize on that opportunity.
At 6:15 am S&P futures were at about an equivalent of 2790 - which is approximately 60 handles, or approximately 2% below the low end of my projected 2850-3300 price range that I anticipated over the first half of 2020.
I am adding to my Spyders (SPY) at below $279 and I plan to use this panic, and slight undercut of my projected trading range, to selectively buy more equities.
(This commentary originally appeared on Real Money Pro on March 9. Click here to learn about this dynamic market information service for active traders and to receive Doug Kass's Daily Diary and columns from Paul Price, Bret Jensen and others.)
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