We’ve seen this before. It happened 12 years ago in 2008 when the stock market crashed. Fast forward to 2020. The reason may be different but the move is much the same.
JPY, USD, Gold, CHF will still be the safe haven assets. USD was badly beaten recently because of the possibility of a rate cut. But do take note that US economy is still by far in better shape than the others. A pair like EURUSD must remain in close watch as recent rally is making it attractive for a short because EU economy is in no better shape than US’s.
Oil has been badly beaten. In the last few hours of trading last week, rumours were circulating that OPEC will cut 1M barrels per day instead of 600K. US Rigging went down a bit. Both these news bits failed to push oil well enough although Brent closed above 50.00. This hints that the impact of COVID-19 overcomes any good news for oil.
Today, the rumours hit the presser yet again with Russia saying that they need not act not unless oil hits 42.00. Although he hinted of cooperation, the fact he mentioned that Russia is well off at current price levels may just be a signal to further selling until the last minute. Could the market actually send it down to 42 just convince Putin to act?
Given steep rise in COVID-19 cases in Iran, South Korea and Italy, travel bans, and refusal of American Airlines to serve for Milan, we might just see the bears dumping oil some more.
For equities, it is expected that the market will continue to fall for the next 3-6 months. The best time to get in the equities market would be around 3rd quarter of the year. Perhaps during ghost month? As I have always told my students, when markets fall like this, stay cash then buy the blues at the bottom. It’s one of the best proven strategies there is.