The recent rally we've experienced from the March lows of the market has created angst among some investors who may otherwise exhibit fear of missing out (“FOMO”) symptoms after watching the rather sharp recovery in equities recently.
Those who got out of the market as the COVID-19 pandemic became widespread they now wish they never sold. Those who waited past March lows for an additional leg down may also now worry they missed the boat.
I think right now the market is overreacting on the positive end of the spectrum. I don't believe this incredible rally in stocks is warranted, and I furthermore do think we will have another leg down in stocks once investors see how bad earnings ultimately will be this quarter.
There is structural damage done to the overall economy - millions of job losses won't go away overnight. As debt levels are now an all-time highs in Canada and many parts of the world, consumer spending which has driven the economy is likely to slow.
As such, I advise caution for investors who find themselves on the sidelines now. I think the time to get into the market again is when we can collectively begin to accurately estimate future earnings and make projections around growth.
Right now, most investor valuation tools and metrics are useless, as they are backwards looking, and we simply don't know what the future will hold or how bad this recession we're now in will ultimately be.
Invest wisely, my friends.
