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TAKEAWAYS & KEY EXPECTATIONS
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February 14, 2020
Equity Market Commentary - Feb 2020
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February 14, 2020

Equity Market Commentary - Feb 2020


TAKEAWAYS & KEY EXPECTATIONS

Equity Market Commentary - Feb 2020

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February 14, 2020

 
 

In his February commentary, Andrew Slimmon muses about the global equity market and wonders whether it has “gone off its rocker” considering the agitated state of affairs in the U.S. and the world. The coronavirus has shut down large portions of the second biggest economy and, the stock market responded with a paltry -3.2% peak-to-trough decline.1 The leading Democratic nominee at the moment is an avowed anti-capitalist, and yet the market ignores the potential implications. President Trump is impeached and tensions with Iran escalated, but both proved to be non-events in the eyes of the market. What the heck is going on here?

 
 

Slimmon reasserts his thesis first presented in his January 2020 Outlook and reiterated on his most recent “Market Alert.” Namely that 2020 is going to be a bullish capitulation year, just as 2013 and 2017 were. In each of those prior instances, investors realized they had made a mistake by selling out the previous year, or were too bearish, and thus reversed direction and chased back into the market. And because everyone looking to invest was waiting for a pullback, those pullbacks became muted because of the incremental buy pressure.2 In Slimmon’s view, this is the key point. Bad news does not cause significant declines, because investor mindset has shifted from selling on weakness, as was the case in 2019, to buying on weakness, as is the case so far in 2020.

Beyond his commentary on “bullish capitulation” Slimmon also makes the case for value stocks in addition to growth, looks at the latest from the Fed and risks of economic strength, and questions both the underperformance in some non-US markets and the aggregate expensiveness of U.S. equities.

 
 

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1 On January 17th, the S&P 500 peaked at 3,330 and bottomed on January 31st at 3,225.

2 “Market Alert” February 3rd.

 

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