SPX Earnings Yield
March 13, 2020
Equities are extremely oversold with sentiment also at bearish extremes, but reversals are usually two-session events at least. The ‘ideal’ technical setup today would be a close near the open, followed by significant gains on Monday. We’re completely open minded about the potential for lower lows, but the risks now are more clearly skewed to the upside. Credit for South Korea’s more shallow infection curve and lower mortality rate goes to their massive testing strategy that largely relied on private sector biotech companies. Decreasing case counts in the US and Europe are probably required for a more sustained recovery. But given current equity extremes, a fairly significant ramp in US testing might be all it takes to put in a low. Eurozone finance ministers will be meeting Monday and expected to unveil a larger fiscal response, while reports suggest the White House and House Democrats are getting closer to agreement on a fiscal package.