Let's just play out the nightmare scenario for the bulls. You saw its sketch in yesterday's trading. Today it will come more into view.
First, the coronavirus strikes here -- and strikes hard.
That taxes our excellent public health system and causes a severe slowdown in our service-based, retail economy.
Next, we begin to get a series of weaker employment numbers. The numbers are palpable and must be acknowledged by the Fed.
But the Fed stalls. The economy continues to slow.
The president is helpless against the virus -- remember this is the worst case -- and neither the Gilead (GILD) acute treatment nor the Moderna (MRNA) vaccine are enough to stop the health rout: The Gilead because its strength has been overrated by a Chinese-captive WHO, and the Moderna vaccine because we are a prudent society that does not want to "give" a healthy person the coronavirus.
Of course if the Chinese had the Moderna vaccine, is there anyone who would doubt that the trials would have started yesterday? It's a dictatorship. They routinely execute people. Why not experiment on them? But it looks like it is not going to happen.
With the Fed on hold, you get a sudden surge of support for the Independent Bernie Sanders, who, when you mention him to his rabid fans as a communist sympathizer, they accuse you of red baiting.
But who are you really baiting? There is no Soviet Union trying to bore from within. If anything, the Russians would like Bernie to win -- but that's not what the movement is about. The movement is a rejectionist one. It's about redistribution and anger -- and the latter is devastating to the bulls.
What does Sanders want? He wants single payor health care, which he believes will save fortunes. He wants the rich to have to pay not from their wages but from their belongings. Look through history for that kind of program and you tell me who has done that.
As the summer comes around and the nation has been hit hard by the virus, the Trump people discover their jobs are threatened. They decide to stay home.
At that point, Bernie develops a commanding lead.
The market can't handle that and begins to adjust for a Sanders president and a possible war on capital. If that's the case, then you have to expect capital gains taxes to go the way of ordinary income, which makes it an easy decision to sell, despite the buy-and-hold index mentality.
At that point, somewhere in the fall, Jay Powell acts, but it is too late. Our service economy can't recover from the stay-at-home economy.
The swing states which went for Trump have lost too many jobs to the virus. Those Trump voters go away while the youth of the country gain comfort with the redistributionist policies of Sanders because he will forgive their most onerous obligation: student debt. Why not? A totally love stance, who doesn't want that debt cancelled? It might be just what the voting public ordered.
We take a 10%t hit just by people who want to lock in capital gains. The companies aren't sure they want to buy back shares because the virus is still raging.
Sanders takes office.
The bottom is put in.
That's the nightmare. Investors are beginning to dream it is not a dream.
It makes them want to sell now, even though we are three-and-half percentage points from the high. It's only natural, if you believe this entirely logical theory comes true.