The FTSE today closed at 5900. It is a long way off January's 7674 level - a nice 24% down.
From just that you would expect a bad year, but actually this is a pretty shocking level to me in terms of resilience. The UK economy contracted 2.5% in Q2 and is expected to drop anywhere from 15% to 30% in Q3. This is much worse than 2008/9.
In 2008/9 it did take 6 months but in the end the market ended up 50% down for a short while, albeit with recovery also very sharp due to all the algo trading, so the low did not last that long, a matter of days and weeks.
This time though is it different? On the plus side the banks are not bust, on the downside....everything else is.
Another indicator is the oil price, which is rising slowly back towards $30 per barrel. Whilst this is a 50% drop so far this year, there ia a huge glut in the market. Look in the sky, there are no planes. It takes seven barrels of oil to make one of Kerosene. How, with Saudi and Russia still exporting, is the price holding up?
To me the answer to both questions above is twofold. Part A is there is a huge amount of trading going on and some people taking some very silly naked positions. The Covid situation may only just be beginning of the pandemic but the markets are pricing it in as if it is over. I hope they re right, but it seems a very risk-on for a position. Part B is the huge printing of money by the Fed and others to give liquidity to the banks has seeped, as always, into assets. Fake money swapped for real assets by those happy recipients banks. This is the desired effect as far as the central banks are concerned.
I don't but it myself, when the next set of GDP figures come out or anyone one of hundreds of potenitla covid-related bad news stories the markets are going to head back down at least a thousand points on the FTSE, two thousand it events go badly. Apparently the markets can stay wrong longer than I can stay solvent....doubt it this time but I guess we will see.