Testy Tuesday – 11,000 and Bust on the Nasdaq?

Happy 11,000!  

That's right, only 4 months ago the Nasdaq was at 6,771 and now we're over 11,000 this morning, up 62.5% in 4 months.  OK, so we fell from 9,000 in January so we're "only" up 22% for the year and that's normal in such a booming economy with people out frolicking and shopping and fully employed with bonuses and rasises for everyone, right?  

No, this is so wrong,  actually.  Last year, without the virus and with the tax cuts and with the Fed and with the China Trade Deal – the Nasdaq was at 8,000 but, since last October, we've one crazy and popped 37.5% overall and we gave it all up in a flash crash in March and now, despite the fact that the virus (remember the virus) is much, much worse than it was then, we're up much more than that now. 

Will the virus be cured?  Yes, probably by March we'll have a vaccine and certainly we'll have treatments that lower the damage done by the virus – hopefully it will be more like pneumonia or bronchitis – something people get and get treated for routinely.  Still, that's not the case yet and ignoring the economic risks that lie ahead is insane.  To a large extent, this is simply a reaction to all the money that's being thrown at the problem but that money can't all stay in the market because the problem is long-term and expensive – and it will suck that money right back out.

Speaking to CNBC’s “Managing Asia” anchor Christine Tan, Piyush Gupta said government stimulus in many countries is helping businesses tide through the current difficult period. But when those measures come to an end, many companies may not survive, he explained.

“Do you keep putting money … using public finances to support companies or do you let creative destruction happen a la Schumpeter? This is going to be a real challenge particularly in the SME space around the world, I suspect this will be a big, big challenge next year,” he added.


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