Back to happy days again!

Well, probably not (yet)… While we had a very solid rebound in April, the social and economic situation still looks very unpredictable.

Equities rallied this month with the S&P 500 up +17.7% and the Nasdaq at +19.5%. Our strategies performed positively as well with Universal +4.74%, MiniMax +8.12% and Pro 10.9%

As we begin to think about reopening from the lockdown, I wonder how we will be changed forever. When will we shake hands again? Will we travel to meetings again or will we just stay home and Zoom? Will the home delivery of food and other goods become the norm? Will higher education be an online experience? Will entertainment and sport become a virtual event? Will we even need traditional offices anymore? 

All these questions and more will have to be answered in the coming months and years. Humans are evolutionary beings and nothing in life is simply black and white. We adapt and change in the face of adversity. It is this ongoing process that ensures the survival of our species and leads us to emerge changed but stronger than ever before.

But what does this mean for the economy? I believe that markets are simply a microcosm of people and societies. As such, they evolve and adapt as well. Like people, markets follow certain basic rules that serve the basic needs of investors. In this way, the game itself never changes. In the world of the stock market, it is still all about risk and return, about choosing the most attractive asset class at any given time. As we go through one economic cycle after another, we see that every major asset class (equities, bonds, real estate, commodities and cryptocurrencies) periodically falls in and out of favor. That is happening now and will continue to be the case in the future. 

I’ve been asked a lot lately whether this bear market is now over. Bear markets are generally caused by a decline in corporate profits and the resulting drop in GDP. This is also known as a recession. Falling stock prices are merely a symptom of this reality. Global pandemics, terrorist attacks or financial crises do not cause bear markets themselves. However, they do affect the ability of companies to generate and increase revenues – and that ultimately causes bear markets. 

We are just at the very beginning to see how much the corona virus will affect revenues in the months and years ahead. Much will depend on the speed with which a medical solution is achieved and on changes in social structures. Will the gains go up or down next month? When they stop falling, we will know that the bear market is over.

Stay happy, healthy and wealthy!

Omar