Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Chief Macro Strategist
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The 1930s guide to whether the rally can continue
4 minutes to read
Peter Garnry
Chief Investment Strategist
Summary: Yesterday's close in S&P 500 marked a 17.6% gain in three trading session something we haven't observed since the 1930s in a testimony to how volatile markets have become during this COVID-19 outbreak. We have looked at previous big moves and what S&P 500 did subsequently. History suggest declines on average in the next two trading sessions after such a big move but then over subsequent six weeks equities offer cumulative returns of up to 6% on average. Over a three-month horizon the outcome range is massive so investors should be careful about taking bold positions. In other words this is a trading environment where active management of positions is crucial.
Yesterday’s close in the S&P 500 Index marked a 17.6% gain in three trading session turning it into the 6th biggest such move since early 1928. With aggressive policy moves and a period of optimism it’s worth pondering where equities will go from here.
Today has so far only offered risk-off for investors with equities down 5% in Europe as the EU Council meeting last night was a total disappointment for Europe as especially Germany and the Netherlands against eurobonds and the leaders could not find common ground on a coordinated fiscal response. This has left the market wondering whether Europe’s recession will be deeper and with the weekend upcoming many traders might be realizing their gains this week.
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