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“ ‘This time it’s different. It’s even worse.’ ”
That’s Bill Blain, strategist at London-based Shard Capital, sharing his ominous take on the stock market on Thursday ahead of what he described as “the most critical election in global history” and as investors grapple with spiking coronavirus numbers.
“Winter lockdowns, fears about second and now third waves of infections, and tumbling stocks on the back of prospects for a crumbling economic recovery across Europe have put markets into full tumble mode,” he wrote in a blog post. “It might be the last couple of days of the month, but this feels like it could develop into a classic October crash.”
His bearish outlook is based mostly how ineffective he believes all the free stimulus money will ultimately be once “the dark and sordid truths” of quantitative easing are finally realized. “You can fool the markets with massive bailouts to step a catastrophic crash,” he said, “but no amount of QE can stop a tiny virus a billion times smaller than a computer-screen pixel [from] doing its stuff.”
So what’s an investor to do to prepare for what comes next?
“We will overcome this pandemic, and that means fundamental stocks are on!” he said. “But the deepening lockdown and the Economic Fabianism required to fight the virus means there may be more market pain to come.” He urged investors to pick “your moment to re-enter markets … carefully,” as he considered what his personal approach will be from next Tuesday onward.
“I’m in the process of working out my post-U.S.-election strategy,” he went on to say. “And I’m frankly wondering if it’s worth the time and energy.”
Sell oil in case Biden wins and pushes green energy? Short tech stocks based on the threat of an industry clampdown? Tweak exposure on concerns about the future slope of the yield curve?” There are clearly lots of moving parts. “Should I just admit the attractions of further investment directed at the U.S. now look … [q]uestionable?” Blain asked. Maybe I should be investing elsewhere?”
In his view, stocks in Europe and the United Kingdom are cheap for a reason, and he’s not exactly tempted to add exposure there, so Blain has his sights set elsewhere.
“This morning I shall be filling in the self-dealing compliance forms to shunt a part of my PA investment portfolio into Asia,” he explained in his “Morning Porridge” note. “The occidental part of the global economy has been floored by the pandemic, while Asia is back up and running.”
Meanwhile, with only a couple of days left in October, there was no market crash taking shape Thursday, with the Dow Jones Industrial Average DJIA, +1.12%, Nasdaq Composite COMP, +2.08% and S&P 500 SPX, +1.72% all rebounding modestly after being hit hard for several days.
