BULLET POINTS

• The low point is surely behind us as the headlines turn towards ECONOMIC RESTART. But not so quick....
• Boris back in charge - Boris is back on the microphone this morning making it clear that the UK are not going to prematurely lift social-distancing requirements and asking UK citizens to contain their impatience. "We are at the point of Maximum Risk".

• Other nations are very likely to adopt Boris’ “I’ve had it, and my advice is don’t rush the restart” lead. He is now the global leader in charge after Trump excused himself with his injecting disinfectant incompetence.
• Boris Johnson’s lead will wash over Australia as well and harden the resolve of politicians to not rush the restart. Being firm on COVID-19 has propelled Morrison’s approval rating, he might want to perpetuate that although the media is reporting a ‘not long now’ comment.
• A new phrase emerging – “Second wave” – the fear of. Something to be avoided. Might be the excuse some politicians need not to lift restrictions.
• Not helping today is the relapse in the oil price – Brent crude down 6%, WTI down 23%. We may have seen the lows but there is no rush back for energy stocks.
• A$ rising which is a sign of improving economic optimism.
• Lots of big US results this week. Caterpillar, Google, Boeing, Facebook, Apple, Amazon. There is a forecast that US earnings will fall 15% in Q1 down from the +6.3% expectation in January. Getting these big results out of the way, good or bad, should be good for the market. Results season de-risks earnings and injects more certainty. Uncertainty is the market killer. As soon as the market can quantify the earnings damage it can move forward; earnings uncertainty peaks, the volatility will peak (already has), and certainty returns. Certainty is the foundation of bull markets. Getting some earnings certainty (good or bad) will hasten the chances of a bull market return.

• The FOMC Meeting and statement on Wednesday (Thursday morning our time) will be a bit of a driver. There is no chance of a rate change factored into the bond market for the next year at least but their statement and assessment of the economy will of course influence markets. They are unlikely to offer a light at the end of the tunnel yet, but they just might.

STRATEGY SUMMARY

• We think that the headlines will improve from here and the low is in. We wrote about it in yesterdays strategy piece. CLICK HERE to read or listen. May be right, may be wrong, but that's the current assumption.
• Despite writing about the worst being behind us, we are not prepared to go all in again yet. When it comes to timing you have to look to trends not fundamentals and the peak we saw last week has not reversed yet on a market or stock level. Yesterday was a good day for the market but it takes more than one good day to start an uptrend. Last week we saw 10% of the All Ords with RSI sell signals. We have not seen 10% with buy signals. In fact almost no buy signals. So still waiting to launch back in. Lets see if yesterday was a one day wonder or a change in trend. Today may tell us.

• We have started to nibble some of the more geared recovery stocks - Here is a list. There are so many opportunities around, we could have doubled this list. Some of these are high risk, some lower risk. The size of holdings should reflect that. MFG, WTC, IEL, TAH, REA, CWN, OML, ALU, WEB, FLT. Small bets only. These are quite aggressive picks. When the market gets going again we will be focussed on ‘big quality’, not ‘geared recovery’. Please note these comments relate to the funds I run not the Marcus Today Newsletter portfolios which are run separately by Chris.
• Banks – I cannot tell you our frustration with the bank sector. We hold them so they don’t hurt us when they rally but yesterday was a minor disaster with the sector collapsing again on the NAB’s rather opportunistic capital raising which has swept the legs away from sector sentiment, yet again. Not to be left out on the opportunity to clear the decks, WBC announces more provisions this morning. What will ANZ have for us on Thursday I wonder. We’ll look at the broker reaction this morning and report back. It is usually at the point of maximum frustration that you give up….right at the bottom. We retain neutral weightings but the moment as the bull market gains momentum we’ll play elsewhere.