Date: March 31, 2020

End of Month & Quarter. Bears Getting the Ball

To say this has been a long month would be the classic understatement! Four weeks ago, I was all packed and ready to head to Cabo San Lucas for a long weekend before going on to LA for work. Cabo has been on my bucket list since I used to watch The Love Boat on Saturday nights in the 1970s followed by Fantasy Island. I know. Kinda pathetic, but with only 13 channels, there wasn’t much on.

From high to low, the major indices lost between 28% and 42%. It was much worse in the sectors with energy and related groups down more than 60% and some topping 70%. As you would imagine, the less impacted sectors like healthcare and staples lost under 30%. It was a very difficult months for most investors and one people would like to forget. As we know from history, they won’t easily forget this just like they didn’t erase the 1987 crash, 1990 and 1998 events, Dotcom burst, 9-11 and the great financial crisis so quickly.

And that lack of amnesia will be precisely what hurts investors as the crisis abates and the markets and economy recover. Many investors who have not reduced their risk tolerance already will likely do so sooner than later when stocks rebound a bit more. And judging by history, they will likely stay more conservative for years to come, missing out on what I believe will be huge gains.

For almost 5 years, I have written about Dow 30,000 when the masses were mostly warning of impending doom. It wasn’t until late 2019 and early 2020 when they threw in the towel and went all in. I now think Dow 30,000 will be too conservative for the next bull market. While our model hasn’t come up with anything beyond 30K yet, when I plug in make believe future numbers, there are scenarios to see 40,000 and even 50,000 in the 2020s. I know. I am putting the cart way, way before the horse when we may not have even seen the final low yet. Stay tuned.

With month and quarter end here, there is a seasonal tailwind for stocks the rest of the week. However, during volatile times, seasonal tendencies usually get run over. Yesterday, I wrote that the bulls have the ball for the first part of this week with risk increasing as the week went on. I still think that holds true. It would be a huge victory for the bulls to win the battle over the last three days of the week, but I don’t see that as the likely outcome.



Paul Schatz, President, Heritage Capital