March 17, 2020 12:15 pm eastern time

Markets are currently up 4 to 5% and rising at the moment due to breaking news on massive stimulus in the U.S. including the FED supporting the commercial paper market, support to airlines and even apparently $1000 cheques going out.

For those still too heavily exposed to equities it might be reasonable to reduce positions on this rally. I have done some more selling today and I now plan to sit tight. 

We continue to see what appears to be a national stay-at-home scenario taking place. Ontario declared a state of emergency. I suspect fear levels are still rising. All non-essential consumer businesses seem set to grind to a halt. It’s not yet clear to what extent businesses will receive government money to cover their losses. It’s not clear at all how this will last.

At the moment the markets are having a more optimistic day.

But I don’t think we can be at all sure that the worst is over for the markets.

Commercial credit seems likely to tighten which is the very reason the FED is supporting the commercial paper market.

What will happen if companies start to announce how bad their outlooks now are and if they start to cut or even suspend dividends on an emergency basis?

The point is no one knows where this is headed. A balanced approach of having some equities and some cash and government-guaranteed investments seems prudent.



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