Since we wrote part one on “The Corona Spread” on March 8, markets have taken another turn to the negative. Similar to other stock markets the German market has now lost 35% since the beginning of the year. Over the last week we saw a stabilisation of the market. So a good time to catch up on the Corona Spread.
While the Corona winners (CW) were able to gain ground during the consolidation at the beginning of March, they suffered just as much as the market in the 2nd crash move (both -26%). This is a common phenomenon: In the second phase of a major down move there is (nearly) no place to hide. Unsurprisingly, the Corona losers (CL) once again underperformed by falling another 33%. This means CLs almost halved in value since the beginning of the year, while CWs average -20%. Therefore, the spread has not widened during this phase.
Looking forward into the next phase of this crisis, the key determinants become more predictable, the policy reactions and companies’ profit warnings, but also the spread of the virus itself. It is a very depressing activity, but watching the virus statistics is now useful. We need to especially focus on the momentum (second derivation) of infections and deaths.
The price moves in the stock market may give us the best signal of all. We need to continue to observe the Corona spread closely. A good sign for a market bottom would be to see a period of days where the asymmetry reverses, i.e. CLs fall less than the market on weak days and actually rebound more on strong days.
My conclusion from part 1 is still valid: “It will be key to stay flexible, stay alert, and have patience, then pounce with determination: greetings from the seaeagle!”
The HanseaticHunter
コメント