Real or fake recovery?
The Nasdaq hit a record all time high on 9th June 2020 as it continued its unrelenting upward march, as big bets push indices ever higher on the hope that economies around the world will re-open quickly. I’m not so sure – I am beginning to wonder if this premature post pandemic ‘recovery’ is truly sustainable. Am I allowed to call it fake?
The physical and psychological damage the coronavirus has done to people and to global people economies is clear for all to see. But as we try to breakout of lockdown, I fear the full financial damage is still yet to be revealed.
These big market gains, in such uncertain economic times, are purely speculative. It’s gambling not investing, in my opinion.
Large tech companies continue their accent as the likes of; Facebook, Apple, Amazon, Alphabet, Netflix, Microsoft and Google etc. add to their already swollen stock valuations.
Penny share problem
Retail investors are likely to be indirectly pushing the value of penny stocks far above their real value and these stocks are pretty much all but worthless.
Some of the biggest share price gains registered recently have been with companies that have filed for Chapter 11 bankruptcy protection in the U.S. – such as Hertz and J.C. Penney for example.
Many of these share prices have soared in recent weeks and yet these businesses face serious problems. They may or may not survive. The buyers of these stocks will likely get wiped out or have their share holdings seriously diluted, even if businesses manage to restructure and avoid bankruptcy. The market is top heavy and the value isn’t there – it will soon face a correction again in my opinion.
Fed update
The Fed will be revealing its first economic forecast since late last year, as it skipped a forecast in March just as the pandemic hit.
The Fed chair, Jerome Powell, will hold a virtual press conference Wednesday 10th June 2020 at 19:00 BST after the interest rate announcement.
Markets are waiting…?