Quote of the Week
“You should never regret anything in life. If it’s good, it’s wonderful. If it’s bad, it is experience.” – Unknown
Last week the Dow was up +12% following being down -17% the prior week. Volatility is off the charts. Year to date, the markets represented by the Wilshire 5000 are in bear market territory, down-22.46%. Based on the current data, we are in a stock market collapse.
There is no bottom in sight with the economy at a virtual standstill. Visa just reported that their credit card volume is down 50%. Yes, that is correct, down 50%.
Goldman Sachs is predicting the 2nd Quarter GDP to be down -30%, and Hedgeye is predicting GDP to be down -24.4%. Yes, those are predictions; however, if the GDP is anywhere close to the predictions, there is nothing to hold up this stock market.
Until we find a way to mitigate the effects of the virus, so people don’t die, or we find a vaccine, the older population will not come out of sequestration because anybody could be a carrier. Just think about how much that generation spends: Restaurants, cruises and travel, and all sorts of purchases that won’t be made. That is a massive block of expenditures that supports all aspects of the economy.
I can quote you all sorts of statistics that show how bad things are, but there is no point. The only thing to do with your investments is to have them in a safe position. Fortunately, Hedgeye got us out of the stock market and into safe investments before the crash this year. We will continue to follow the data and the mathematics to allocate your investments.
Adding to the theme of avoiding losses, we created a chart showing how much of a return is needed to get back to even. For example, if you were to lose 50% of your money, you would need a 100% return on the remaining just to get back to even.
The key to successful investing is to avoid losses when markets are declining. “Keep your powder dry” and then buy back in when markets start to go up.