What's causing the bounce back?

Well... this market is fun! Worst week since the crisis followed by the biggest single day price gain in history... Question I have here, is the bounce back driven by:

a) A waning of the fears over the Coronavirus?
b) A bounce back because the market was oversold last week?
c) Biden's win in South Carolina and backing by Klobuchar and Buttigieg?
d) Something else?

From what I am seeing, the options market is still pricing in a pullback, to somewhere around the 2900 level on the S&P, so will be interested to see how the week goes.

What does everyone think and what are we buying? Do we think E&P is oversold (XOP down ~50% since May) and maybe we could see a little bounce? How are Chinese markets holding up as well as they are given the horrific production numbers they just put out?

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Comments (19)

Mar 3, 2020 - 12:13am

This. But also the down move (when they come) are just happening too fast. The mean reversion forces can't hit the tape as fast as stop outs occur.

Definitely some pension fund rebalancing has hit the tape and likely guys just need time to allocate cash.

Mar 3, 2020 - 1:07am

I don't like talking politics but if Bernie does because Democratic nominee, it's over and Trump wins. Gilead is saying they are actually working on a vaccine. The same happened in 2003 and the market recovered.

"It's okay, I'll see you on the other side"
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Mar 3, 2020 - 6:09am

It's not the central bank pinky promises... it is because investors realize Coronavirus is Bullshit, in two months nobody will be talking about this "disease". It is just the mass media that have created such a fear among the population, there is nothing to worry about. Furthermore, it would be extremely incorrect to further decrease rates, they should certainly be increased in such a strong economy in which a long period of low rates has created a huge bond and real assets bubble. Buy futures my friend (maybe too late now already;))

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Mar 3, 2020 - 10:32pm

Whoops... well, they did cut rates, and that didnt work. For what its worth I agree, I dont really see the point of that. Rate cut isnt going to help things if everyone is at home. Should have saved it for when it's actually useful

Mar 3, 2020 - 8:55am

Rate cuts, plus I think people are slowly realizing it isn't a terribly deadly disease. The vast majority of people dying are elderly and/or already sick with something else.

I saw case fatality rates were about .3% for those under 50 (deaths / known cases), which means the actual mortality rate for this group is likely a fraction of that given these people aren't likely to be sick enough to seek treatment in the first place.

Warmer weather also tends to burn these viruses out pretty quickly and spring is a few weeks away.

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Mar 3, 2020 - 10:38pm

I think saying "its not that bad" is a bit too early. Mortality rate is 10-20x that of the seasonal flu, which eveyone loves to point out kills tens of thousands in the US. Its also a bit scary (at least for someone living in NYC) that you can be walking around for 2 weeks while contagious, without having any symptoms. Do I think this is like I Am Legend to come... no. Do I think there is at least a potential that it freezes the system for a while as people hunker down to avoid it since there is no treatment? Yes.

And let's keep in mind, the death rate (overall) is 2% when you have full access to medical care. The US only has ~95k ICU beds (I believe thats the stat I heard, correct me if I mis-heard). This could quickly get overwhelmed if its as contagious as we think, and people are already floating around the US (9 dead since Sunday doesnt seem like a great start). If you say 2% die, and maybe 10% need ICU beds (Totally making that up), that means you are overwhelming the system if you have 950k infected. Is that a lot? Of course. But unlike China, we dont have the ability here to force tens of millions of people to not leave their home, and they still have almost 100k cases... Just food for thought. I think it gets worse before it gets better. I am short in the short term, long over the next 2 year span.

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Mar 4, 2020 - 12:39am

Mortality rate is being misreported as much higher than it is.

Chief Epidemiologist at Hopkins spoke at a Morgan Stanley event today and said the true death rate is going to come out around 0.1% to 0.5%.

Reason this is so much lower than official reports (2-3%) is that official reports are based on confirmed cases, which are skewed toward more severe cases and ignore all the mild ones who don't get tested.

Korea is the first country doing broader testing and they are clocking in at 0.6%. Even they have some skew, so the real number is going to be somewhat lower than that (which is of course then in line with Hopkins estimate).

Mar 4, 2020 - 1:21am

Everyone's talking mortality rates... 2%, 3%... Give me a break. People are so focused on the negative (20x the flu death rate!!!) that they forget this means your chance of survival is 97-98%, IF you even get the virus.. Im no epidemiologist, but those numbers shouldn't be scary enough to cause the level of panic I'm seeing from people right now (especially young adults in the US with access to healthcare). I say buy the news

Mar 4, 2020 - 2:14am

Trump 2020

"Full speed ahead, damn the torpedoes." -U.S. Navy General Farragut
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