Markets Weaken As Trump Warns Of Pain Ahead

Okay, very good morning. Hope everyone is well. 1st of April. Just having a look before I get into the charts at a recap. Of course, first quarter of this historic start to this year has come to an end, and just thought I'd run through a couple of stats and thought I'd start with this graphic as well. This is just a look at some of the Dow Jones Industrial Average performances this some of the individual stocks in the index, uh, over Q1. And as you can see, Microsoft just edging out ever so slightly, a positive gain of 0.01%, otherwise a loss across the board. And as you can see here, uh, the likes of Boeing down in excess of 50%, um, so these, these kind of travel-related stocks, Boeing already facing a lot of manufacturing fault issues as well of late, and then Exxon Chevron, these types of Companies associated, of course, with directly with the energy market, given these historical low, kind of 18-year low prices in the, in the crude oil market. And then banks as well under pressure, given the squeeze on their, their margins, given low, now zero interest rate policy, of course, which has been adopted in the first quarter. The VIX hit a record high in mid-March. Congress has approved a record-breaking $2 trillion stimulus package with more to come, a fourth one now they're talking about. So quite an incredible start to the year. And when you think about it, this is just really the coronavirus we're focused on at the moment, but we've had tensions in the Persian Gulf in the Middle East with the Saudi-Iran and the attack that we saw on those US-Iraqi air bases. We then had the trade war ongoing in phase 1. Now of course we are in the pandemic phase and, uh, yeah, quite an incredible start to the, to the year overall from a volatility point of view. Goldman Sachs, they've come out, and this is kind of what I was referring to when I write my, my week ahead piece in the macro menu about not really putting too much kind of authority behind what banks are saying with their calls about the future. Goldman Sachs have come out and basically revised again with a new forecast, and they're now anticipating an annualized second quarter contraction in America of 34%. And they're actually saying the unemployment rate is to peak at around 15% around mid-year of this year. So yeah, that's, that's the latest of what they're saying, continue to remain quite bearish and saying that the worst is still yet to come. And we're going to talk about that for a moment. But on that point of jobs, a couple of housekeeping points I just want to make you aware of. When I do post this video on YouTube, I'll also share a link to an exclusive webinar that the team and I are going to be doing on Friday for the release of non-farm payrolls. So we'll start about half an hour before the actual data comes and we'll then cover it all, and then also the open on Wall Street, and then take a Q&A. This is obviously going to be something of meaningful in terms of the, the number in itself is, is set to be one of the worst readings we've had since the depths of the financial crisis. Whether or not that's going to really be too much of a surprise is yet to be seen, but certainly it's going to be a volatile end to the week. So register for that. I'll share the link accordingly in various different places. Everyone's welcome to join, even students. If you are a student at the moment, obviously university is closed, a great way for you to see markets in action. So do have a look at that. Also as well, the Amplify Now platform, our e-learning on-demand platform— I know I've mentioned this a few times before, but I was speaking to some of our guys internally yesterday and we've actually added two new chapters to this. So not only is this now a kind of series of on-demand videos, of which there are 70+ of really me and the head of TradingPeers explaining lots of different market kind of fundamentals, but we've just added two new sections, one called Macro Now, which I'll kind of be in charge in and adding content. And these are going to be little short kind of 5, 10 10-minute sound bites where I talk about key things I'm looking at in markets. So for example, I get a lot of questions about what are the best online resources to track the coronavirus. I did a short video on that yesterday. And then daily trade setups— this is what Sam's going to do. Sam being one of our traders and mentors, he's going to, at the end of every European session, be doing a wrap that will be exclusive to the, to the portal. So Hopefully that's a, that's a good addition. Do check this out, and again, I'll share this link to this, uh, this portal on the video later. Right, well, let's get stuck into things. Let's have a look at the charts this morning, and definitely a risk-off feel to proceedings. Equity index futures already kind of sliding overnight in Asia. I got the S&P here, which I'm going to make a bit bigger in a moment. And then that's fed through into the European stock indices. So the DAX is down just over 350 at the moment. Despite some of these moves, gold generally was, was tracking lower last night, but since that Asia session has begun, it has clawed back back to around settling on the $1,600 level for the moment, given some of this new risk-off asset class movement. T-notes up about 18 ticks. And the dollar's up as well, a touch this morning. One of the things was just going to have a look at the, the S&P 500. And this was something which I was, I was looking at yesterday and I was putting out a couple of tweets. This is one of the tweets that I did at the time, was here. Not sure if you caught it. I know there were— I was speaking to one or two people remotely yesterday. I know a few of them got hold of this. I did feel quite strongly yesterday that the S&P 500, given the phenomenal run-up that we had had in prices over the course of a pretty short time frame, probably about 6 trading sessions, we'd obviously gone up over 20%. Central banks have done a lot of different things in order to help offset this impending downturn. Governments have been the same in terms of fiscal stimulus packages. That was one of the main reasons for a big part of the, the kind of midweek rally we had last week. But obviously yesterday was the month end, the quarter end, and I still felt that, as you've probably come to realize every time I'm doing these briefings, I'm, I'm still fairly bearish at the moment, and I still feel like the market is underplayed, particularly from the United States point of view. The impact and the severity of what the coronavirus is going to have. And some of that has come to reality so far this morning because, as I'm going to update you, Trump has made a few new comments. But this was something I tweeted yesterday morning. So this was the chart when I made that kind of call as I saw it. And you can see the reason, you know, here is not only do I base these, these kind of thoughts around a fundamental kind of narrative, but, you know, strategically, how are you going to play this out from a technical entry point of view. Kind of the, the technicals for me give me a template. And so here we were looking at the last week's high. You had kind of the failed projection in the overnight Asia session. It came up again to have a test during the European morning, and I know that's where some of the guys did get, get short at that point. And then that was up at around the 2634 type level. And if we look back to the charts this morning Obviously that 2634 mark was, was here, and it initially came, came good pretty quickly, went all the way through the 2600 handle. We actually got into the US pre-open and we'd already come back down to about 2577, so a decent kind of 50-point move there. Markets did come back up quite, quite strongly during the open, but then we've just seen a continued deterioration. And, you know, since that, that test on those levels the 34 mark. We're all the way back down now to, to a low point this morning. We've just printed at 24.76. So yeah, really nice movement there. Hopefully some of you, you know, continue to hold some of that position. And there's a few people— Sam trading over the, a more kind of medium time frame, and I'll be interested to see what he's got to say later when I, when I do touch base with him. But yeah, kind of then in fitting with this general feel that, you know, the worst is to come, kind of like what Goldman's was saying, you know, what we've been saying, what Trump's now said overnight. And the other thing that I'm quite interested to watch now is how WTI crude is gonna perform. And well, let's just extend that trendline. All right, yeah, fairly rough, but I was looking at a trendline there previously on Monday where we broke above. It looks like we're coming back down to test around those points. It could be quite interesting around that. Where we are at the moment, it's a $20 handle, that obviously also being the late US session low. That was when around the API inventories came out. So we've had a bit of a test and bounce on that at the moment, but definitely interested in keeping an eye on oil. Just while we're on the subject of oil, we did have the API inventories last night, and as you can see here big builds across the board. And this is really quite worrying for, for crude. It does kind of put up some more potential pressure on prices. Uh, the crude build and the headline was just short of 10.5 million, more than double consensus, the biggest build since Feb of 2017. Cushing, biggest build since Feb 2019. Gasoline, biggest build since Jan 2020. So across the board, bearish numbers. And, you know, there's been quite a lot of people talking about this idea of huge infantry bills but potentially exhausting existing spare storage capacity, which will mean the market balance requires an unprecedented output shutdown by producers. But quite on the contrary, of course, OPEC overnight have failed to unanimously agree on an emergency meeting of its Economic Commission Board, according to sources. Saudi and Russia are obviously still in this, this standoff at the moment. And as far as that goes, as long as that continues, and also with the potential kind of downside risk to the worsening of the coronavirus beyond what markets are kind of priced for at the moment, does mean that oil definitely is on the radar today once again. But let's, let's go through a couple of different things. And obviously prudent to, to do a full update on the coronavirus. That is one of the key things again that's driving market sentiment. And so from an overall global perspective, United States now closing in on 200,000 confirmed cases, total global cases just over 850,000. But this is what Trump said last night, and it comes after he said that he warned of a, quote, painful 2 weeks ahead. This is what they've been talking about in terms of the, uh, the kind of compounding growth that you get with the way of which this virus tends to jump and then spread and multiply out each time. And, and what happened during one of these speeches here, there was a presentation that was happening, is my understanding, and it was from some of the, the chief kind of medical advisors and health aides, and they basically showed a slide on one of the presentations which showed, uh, one particular projection where there was a potential for 240,000 Americans could die from the coronavirus. Now obviously, much like when there's ever any type of scenario building or stress testing, it's important to do a variety of different kind of worst case in, in this sense, in terms of highest rate to best case lowest rate kind of scenarios. But, but just the fact that they've said that, of course, this kind of puts the seed in, in, in the psyche of, of markets and can turn quite negative quite quickly. Because you remember the reference point before was Trump saying 100,000 and the chief medical staff in America saying 200,000. Now you've got this 240 on the table. And I was tweeting a friend of mine in New York about this, and we had a bit of an online conversation. And he's the head of futures at a big US prop firm, and, and this is one of the things I was saying, was that from a fundamental point of view, when you're looking for these cues for price action to unfold, it's important to try and lock into these kind of numbers that provide this platform then for you to benchmark over what is actually worse or better than expected. And certainly this number adds another 40K on the top. New York City death toll now north of, of 1,000, and it comes as well where I'm looking at this FT Updated Tracker. And, you know, one of the things here is these little stars. I'm not sure if you've, you've observed those before, but there are these little stars here that signify when there has been a nationwide lockdown put in place by the national government. So as you can see here, there are some countries like Germany, for example, that put the lockdown in way earlier than most other countries. If you look at the actual UK lockdown, we actually had almost 4.5 times more confirmed cases before the lockdown went into place compared to Germany. And subsequently then, when you look at the actual death toll, you can see Germany is below that of the UK. So this is looking at deaths, this is looking at the confirmed cases, and one of the most staggering lines here, of course, is Here, this is a log scale on the, on the x-axis, meaning that it's not a kind of fixed increment change going on the left bottom to top, actually doubles on each time to take into account then a much smoother line to look visually at the trajectory of these, these cases. But you can see the American one has just really shot higher, well and out and above all of the other mainland European countries, and now obviously north of— well north of 100,000 here. So the other thing was quite interesting when you look at it on here is when you go really far out to the right is looking at this potential secondary hump that you're seeing in China here. And this again, just to reiterate, is one of the things that, that we personally have seen as quite a big risk, is we're currently, you know, dealing with and confronting this first initial outbreak and acceleration of the virus but there is also the few months down the line when it's the question mark becomes then the big one, and then the road that the government will be split at is do we go down the path of some sort of degree of normalization and return to normality, or do we go in this particularly gradual and arduous process of being so slow but feeling fearful of a renewed second wave of cases? Obviously the latter has much more longer-lasting— it delays almost the economic recovery, and they will be mindful of that. But on the other side, obviously, this is a massive health risk of people's lives on the line. And so this is why I think it is a— it is quite a negative. I don't think people really thought about that secondary part yet. Everyone's dealing with the— what's happening at the moment. So I definitely don't think that as soon as, you know, there's a peak, well, that's it, there's a bottom, there's a rally. You know, I think there's way more to this coronavirus development over the medium-long term than perhaps people have thought. And that's till this point keeps me on a, on a fairly bearish mindset. As I said, from a deaths point of view, Spain, Italy— I mean, the US is rising probably at the most steepest rate at the moment. And one thing you would have noticed on that previous graphic with those stars, America has not put a nationwide lockdown obviously in place yet. So that means then that we can make the assumption, not actually plucking numbers, but that the numbers will rise in confirmed cases quite sharply, and as a knock-on effect, so will, will deaths. And hence the reason why you're getting these multiple hundred thousand estimates circulating at the moment. Um, looking at the US in particular, I mean, this, this puts it perhaps into a bit of perspective again, uh, as a reference point for when you hear news breaking and you hear about the, the number of deaths and so on. But this is looking at the number of deaths per day in America, and as you can see here, we're talking about 518 at this present point in time, so as of the 1st of April. But here, this is looking at over the next 2 weeks, so this is looking at that kind of peak in the, the virus over the course of the next 14 days and then the eventual fading off of that. But this is where the you have the, the kind of breadth of the different projections. The most pessimistic, of course, being that we get up to a death rate of nearly 3,500 on the upper bound, or a more optimistic estimate, we only go just over 1,000, which is obviously still more than a doubling of where we're at at the moment. So either way, it is going to get worse, but there's quite a big difference between the lower and upper bound, of course. And, and this is what a lot of people will be tracking going forward over the next coming days. Similarly to what we've been talking about, JP Morgan Asset Management, they've come out with a research note this morning, and generally the headline reads as similar to what we've been saying. It's too early to buy stocks, not yet confident advocating an overweight risk assets position, saying that the market's still vulnerable to deterioration in the health situation pertaining to the coronavirus, of course. So again, I don't think it's particularly groundbreaking, but, you know, just to show that it's not just really— it's not so much important what my view is, although I do feel quite strongly about the fact that the getting over of this virus is going to be particularly difficult, and perhaps more difficult so in its overall containment and recovery period is what I'm fairly bearish about. But it's about understanding then from a trader's point of view, an investor's point of view, you know, what are all these big institutions saying? And it's not just one or two like GS and JP, it's about what's the street saying generally. So in the whole breadth of different institutions and different, you know, in terms of their, their most bullish and bearish scenarios, it's good to get an overall feel for this to then have a more rounded idea about where does the general market view sit, because that will probably determine what's priced in. And that's what you're really trying to determine as a trader. If you know what's priced in— and I know that's not an exact mathematical formula— but what you can then ascertain is how markets will react when new news does break and you get further developments. On a separate note, we have had Trump. He is set to announce deferrals on on some tariff payments. But the important thing here, uh, this order does not apply to Chinese goods or duties on metals. So it's a little bit of a soft touch in that respect, uh, and something to still keep an eye on between that kind of US and China, um, dialogue at this point in time. Okay, calendar-wise, what have we got? Um, these PMI numbers that are coming out are all final readings, so I don't think they're going to be particularly too much of interest. But then later on this afternoon, we do get the ADP national employment figure. So remember, this often acting as a precursor for the, the Bureau of Labor Statistics report we'll get on Friday, non-farm. So ADP today expected at -150. However, check out that for a range, the median estimate. So if you think about this distribution of estimates, uh, the curve kind of looks I guess if I was to shape it, something like that. You've got, you've got a median of -150, you've got a best case of 0, and you've got a massive tail like this, which is for the worst case. Someone actually is looking for a -1.5 million reading. That would be pretty huge if that did come out in terms of a as far as I try to think of the numbers that have been in the past over the last 14, 15 years. Otherwise, we've got ISM Manufacturing PMI, construction spending, you've got the, the DOE Energy Inventory numbers. So do obviously keep an eye on those as well. If we do get a bit of a run, further weight coming to the equity market, again, Sam's going to share some charts with you guys, but Definitely, if equities do come under an assault today, then seemingly similarly I'd keep an eye on oil. And if oil starts to break down structurally and through $20, but beyond the $19, kind of mid-$19 price points we were hitting at the beginning of the week, well then that could further accelerate the kind of unwinding of those sharp gains that were seen in the equity market yesterday. So yeah, definitely lots to watch in the session ahead. Okay, that is it. Any questions, of course, just feel free to leave a comment on the video. I've been replying. There's been some fantastic comments of late, so keep them coming. And then if you have got this far watching the video and you're not subscribed to the channel on YouTube, just hit that subscribe button. It would be much appreciated. All right, have a good day, guys, and I'll catch you later on. Thanks very much.