Ironically, the market may be more likely to crash (again) as the economy reopens. In order to understand why, it helps to think about a range of scenarios:
Everything coming out is suggesting scenario B or C is more likely then A. There are several areas of life that are unlikely to return to normal for a long time
Of course, the stock market is only a small fraction of the total economy and much of it may not be exposed to activities that that have lasting change. As for why the market may crash is that today there is still a lot of uncertainty: uncertainty allows for weighting of better outcomes. As the economy reopens and activity doesn’t resume then certainty for a poorer outcome could become more clear. As for the counter-argument, if airline traffic resumes quickly and rolling shutdowns are avoided then that would point more toward better outcomes.
I really do not know and fortunately knowing is not needed to trade this market. But, it is worth keeping in mind this may be a case where everyone wants to reopen the economy for the market, and the market has other ideas.
As of writing, the market is up several percent and look strong.
The author is passionate about markets. He has developed top ranked futures strategies. His core focus is (1) applying machine learning and developing systematic strategies, and (2) solving the toughest problems of discretionary trading by applying quantitative tools, machine learning, and performance discipline. You can contact the author at email@example.com.
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