Yesterday the wider markets in Australia popped again.
The All Ords and the S&P/ASX 200 were both up 5.5%. Some stocks such as Afterpay Ltd [ASX:APT] were up more than 30% by the close.
What was most astonishing about yesterday though, was the way the market was bookended. All the action was at the start and at the close.
During the day the market was in a gentle decline from the burst at the start. Then with about two minutes left in the day it skyrocketed again.
Weird, strange, irrational.
Welcome to today’s markets.
The funny thing is we’re saying this is a false boom.
Well, it’s not really a boom yet. But the last two days have seen consecutive explosions higher of the wider ASX market and some massive single day gains of individual stocks.
It’s a wild world out there. And we’re saying that there’s a lot more pain to come. And here’s why…
Trends anyone can see
Data and information is easy to come by.
We live in the information age after all.
However, just because you can access all kinds of data doesn’t mean you should. The great thing about the internet is we’re able to share ideas, knowledge, opinions, and all kinds of different data points.
The rubbish thing about the internet is we’re able to share ideas, knowledge, opinions, and all kinds of different data points.
That’s because some information is accurate, credible, and correct. A lot of it isn’t. And people often mistake opinion for fact. That’s more prevalent in the age of social media where ‘Twitter facts’ and Facebook sources are all too common.
The fact is most of the stuff you’ll find on Twitter is opinion. And most of what you find on Facebook is just flat out wrong. If these are your primary sources…get new sources.
This means that you have to be detailed with information and where you get it. Of course there are reputable sites where you can find pretty mainstream information.
Bloomberg, The Economist, Morningstar; these kinds of sites will provide you quite comprehensive data and information.
However, they don’t always tell you the full story.
Sometimes to really understand what’s happening in the world, you need to look for more unconventional sources. To really get a gauge for what the average person in the street is really thinking and feeling, you need to look outside mainstream data points.
Take for instance trying to figure out just how bad this whole lockdown impact is. You know what your immediate circle is like. You know what your household is like. But how do you figure out what the rest of the country is thinking, feeling, and doing?
Well in this strange situation we find ourselves in, you’ll get a pretty good indication by looking at the App Store.
Here’s yesterday’s Top 10 Free Apps from Apple’s App Store (left) and the Google Play Store (right):
Now, looking at that, what would you deduce from the information as you see it?
Firstly, it’s pretty damn clear that people are working remotely and from home. That’s to be expected. And Microsoft Corporation [NASDAQ:MSFT] and Zoom Video Communications Inc [NASDAQ:ZM] will at least get a huge surge in users to Teams and Zoom.
Whether they can convert those to paying users? We’ll wait and see.
Another interesting one is Houseparty. That’s an app that allows people (friends) to all join together online, play games, and have fun. It’s basically a more social version of Zoom. Houseparty is made by Epic Games — the creators of Fortnite.
And Epic Games is owned part privately and part by Tencent Holdings Ltd [HKG:0700]. Whether it too rolls into a benefit for Tencent, we’ll wait and see. But they have weathered this storm pretty well so far.
However, the real worrying part about those lists is the Express Plus Centrelink app and the MyGovID app. Those are not regularly in Top App lists. And what that tells us is the surge of people lining up to make social welfare and unemployment benefit claims.
That’s worrying. And I don’t believe the market has really countered for the serious ramifications that spiking unemployment will have.
The real pain hasn’t hit yet
We’re expecting that unemployment in Australia will double at a minimum. That would take it to well over 10%. And there’s every chance it heads much higher. We could be looking at as much as 15% unemployment within the next couple of weeks.
The impact that has on economic output is devastating. And while the markets have just jumped, the real economic pain of all this has not even come close to hitting as it should.
We have not yet seen the unemployment spike fully hit. We have not had growth figures come through that will show negative growth. We have not yet entered into an official recession. We have not yet seen large corporate failures.
Make no mistake, we will see all of that.
And that’s going to smash the market pretty hard when it hits. We think this market rise is a false one. And that we could very well see one or two more moves lower as we really find the bottom of the market.
A critical junction in all this will be the mass testing and development of vaccine for ‘the rona’. But that’s some way off yet. And while it’s still weeks, maybe months away, the economy continues to shut down.
More market pain is coming. So don’t go chasing gains just yet, you may very well get caught in a trap for young players.
That’s not to say there won’t be a massive turnaround boom when we move through this. It’s just right now, there’s still far too much going wrong to even come close to justifying the daily market swings.
Be careful out there. Stay at home. And don’t get suckered into chasing gains. When it’s time to move properly, you’ll want to be ready and we’ll be right there with the stocks to jump on.
Finally, if you are at home here’s something fun to do. Aside from getting onto something like Houseparty, get a group of friends and play something I’m doing with my friends right now.
It’s the 30-day song challenge. And it’s just something to take your mind off being in lockdown. Each day you and your friends pick a song according to the list below. Collate them all together.
And when we can once again socialise and party together, you’ve got your ‘breakout playlist’ ready to go to remember that time when you were under government-issued house arrest.
Editor, Money Morning