I found this interesting…

All macro factors are pointing to yes – the market is on track for another downward spiral. Just because people are dumping cash into the market does not mean we are out of the recession that quickly. We just finished an 11-year bull cycle, so the market needs to cool down and correct. There will be volatility. I would be ecstatic if the bear market we experienced in March 2020 was the one and only drop. But things don’t work like that. We also don’t have a vaccine. Let’s explore what is going on.

• Consumer spending is DROPPING (accounts for 70% of U.S. GDP). It collapsed by a record 13.6% in April 2020 (this 13.6% is equivalent to $1.89 trillion!).
• Q1 U.S. 2020 GDP DROPPED by 4.8%.
• Q2 U.S. 2020 GDP is expected to DROP by 40%.
• 20.5 million jobs were LOST in April 2020 while 40 million Americans applied for unemployment at the end of May 2020. Surprisingly though, the American economy added 2.5 million jobs in May 2020.
• People are deferring rent, mortgages, and credit card payments.
• Many companies are putting off hiring until things settle down or until they recoup lost revenues (not counting essential or front line workers).
• Risk of a second wave of COVID-19.
• A second wave could lead to extended unemployment and increased social distancing, as well an extended recovery and more bankruptcies. Wall Street has also issued a warning to corporations to raise funds now (mainly through debt) as they may not be able to in the fall as things get worse.
• The $3 trillion stimulus package and quantitative easing can only do so much. The clear fact is that many people do not have disposable income or savings and are finding it difficult to make it past each day. It is a very sad thing to read about.
• Stimulus package: this may be the biggest reason why the market is rallying.
• The current rally is not uncommon and has happened in previous recessions. Historical data does not predict future outcomes but it is also unwise to fully ignore it. All data should be analyzed. There are recessionary patterns that we’ve seen and this could very well be the calm before the storm. A “V” sharped curve is highly unlikely given what banks, funds, and investors are saying.
• Institutional money is not fully invested right now. Warren Buffett has stockpiled Berkshire’s cash balance to a record $137 billion. Why is he holding so much cash? What does he know that we don’t?
• Australia announced yesterday (June 3, 2020) that it is officially in a recession after an amazing 29 year recession-free streak. It was all blamed on COVID-19.
• The National Bureau of Economic Research (NBER) said America officially entered a recession in February 2020.
• On June 10, 2020 the Fed announced that interest rates will stay near zero until 2022.
• On June 16, 2020 Fed Chair Jerome Powell stressed that the road to recovery will be long, and will not even begin until the coronavirus is under control. He also mentioned more aid will be needed.
• The Buffet Indicator (compares the MARKET CAP to GDP): The current reading is 156.3%, up from 156.0% in the previous quarter (see image below). The dividend is the MC while the divisor is the GDP. So as the value of equities rise and GDP falls, the % (highlighted in yellow) rises. As you can see, this happened in the early 2000s (dot com bubble) and 2008 (financial crisis), and is happening now.

If you are looking to invest now, I would be careful. Many stocks are overbought and rising each day. These stocks are also expensive. I am personally waiting to jump back in. Now is not the time to be greedy.