Current bear market rally is significantly supported by 2 days of major short squeezes, basically a technically led rally. CTA’s are jumping out of their short position. A growing number of investment houses warn that this rally is very likely temporary.

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by mekonsodre14

Nomura published an insightful piece about the short squeeze, that partially pushed stocks higher.

featured in this article from Financial Time’s Alphaville (copy link tag text with dot after com to access article)—Tuesday-7th-April-2020/#comments

It also mentions that investors would be wrong to value stocks too strongly for their long-term future growth potential in the current short-term driven news reality.

A quick summary of the greed and fear (fomo) scenario we are currently experiencing

and that half of GS’ clients didn’t reach their lows

Some new developments from today’s economic and infection numbers

Additionally, today’s infection numbers don’t tell the positive story as good as they did yesterday. Spain’s daily death toll has seen 100 more daily deaths than yesterday. Similar stories for the UK and France for which death tolls were speeding up compared to the previous days. New York’s and New Jersey’s fatalities rised again more strongly, really showing a pattern of weaker weekend fatality numbers.

Germany and other countries discuss lifting the lockdown with the key requirement to wear masks in order to be allowed onto the street. The key problem is that approximately 95% of the population in Germany cannot get masks because the supply is too low, and will likely not be much greater in the foreseeable future because global demand is rising rapidly, while supply growth cannot keep up with demand. This puts an effective obstacle to lifting lockdowns in the near-term.

Companies like Accor (strongly exposed to Covid risks) just let 200k employees go. Additionally, more bonds are graded junk with the numbers steeply to rise (

Consumer surveys in Germany concluded that more than 25% of consumers are planning to massively reduce their consumption, even after the lockdowns are lifted.

Edit: CitiBank strategists have suggested that the rally is nothing more than an “aftershock” and is not underpinned by trading volume or any guarantees of an end to the outbreak.

Obviously we are in unchartered territory here.

So, where does this leave us with current investment allocation and risk assumptions in view of the current rally?


Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence.


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