US Equity Markets started the week on a positive note, reversing earlier losses after the Fed announced it was buying more Corporate Bonds under an Emergency Loan Programme. The Fed said that this move would continue to provide liquidity in the markets and keep credit in the markets for large employers. Earlier the US Indices were off by 2.5% on concerns that a second wave of the Corona Virus is emerging while Geopolitical risks increase across America. US Treasuries rallied as the US Dollar and Gold slumped. Having traded to a morning low at 2935, the ‘’buy the dip’’ returned with the S&P closing higher at 3066 in a volatile trading session. The VIX having hit a new rebound high at 44.44, closed 4.68% lower at 34.40. With sentiment at such extreme levels it is no surprise that markets sold off last week. However, with the June Futures and Options expiring on Friday I would not be short as 16 of the last 20 Quarterly Expirations have been bullish. Although stocks have rallied hard since the March 23 low, investors are still nervous, especially after the S&P fell almost 300 Handles since the FOMC Statement was released last Wednesday. One worry for the Bears is the stampede out of Equity Markets as shown by the Total Equity Mutual Flows. We have seen money flow out of Mutual Funds for years but today’s outflows are the largest in more than 25 years. Similar outflows have occurred in 2002, 2008, 2012 and 2016 all of which turned out to be a terrible time to pull money out of the stock market. After we saw the record outflows in the above years, 12 months later we saw the S&P trading higher, between 15% (2002) to 23% from the 2016 low. In my opinion, this negativity is good and should create a major tailwind for US Equities especially as stock markets have the Fed on their backs. Elsewhere Oil Futures rebounded after trading below $35 a barrel after BP warned the virus will hurt long-term energy demand.

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