Waiting for lockdown to end

The S&P 500 is down 19% from its all-time high and up 26% from the recent panic low. What comes next? This depends mainly on the outlook regarding the ending of the lockdown. So far, we have price in the hope of a fast ending.

It is completely open when it ends. What we can learn from China is that the restart can be fast, but they keep tracking all movements via app. As soon as a new infected case is discovered the person and all his contacts must go to a private quarantine…

Israel and South Korea are the only tow countries where such measurements are implemented in a democracy.

The US market has probably gone too fast too far up. A retesting of the lows is in the cards. In case of a 2nd wave after the ending of the lockdown much lower prices must be expected.

From a portfolio construction point scaling into risky assets is one way to restructure portfolio. Buy the dips. But be prepared that it might take a long time until we re-see the levels from this February.

IG corporate bonds trade at junk level. Some might become soon junk but even downgraded BBB bonds might recover. Therefore, companies with a strong balance sheet and healthy cash flow projection are as well on the shopping list.

Pic. 1: China traffic back at pre-crisis level

Published: 09/04/20 by Blackfort CIO Dr. Andreas Bickel on Linkedin

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