Bull, bear or dead cat bounce? Investors can’t be sure as coronavirus infects market’s mojo

Make no mistake, intense uncertainty remains the order of the day for markets.

Is it a bear moment in a bull market? Advisers, analysts and investors are rightly confused.

Kick-started by a stunning 7 per cent rise on Wall Street, a complete lack of conviction among local investors meant the S&P/ASX 200 could not keep in positive territory on Tuesday, closing 0.6 per cent lower at 5252.

Fund managers might be telling us that volatility is cooling as the days go by - but if a 7.7 per cent jump on the Dow does not register as dramatic, then make no mistake, intense uncertainty remains the order of the day.

Just to put it all into perspective the latest “crazy day” on the Dow Jones Industrial Average was the 28th consecutive move up or down of at least 0.5 per cent - the last time a volatile streak like that was surpassed (with 33 consecutive volatile days) was in October 1931 - that’s the year the Great Depression really started with banking failures throughout the world.

No wonder then an unofficial snap poll by one of the biggest investment banks in the local market last week found that only 10 per cent of financial advisers were suggesting clients “go back in” to the sharemarket at these levels.

At 5252 points, the ASX 200 is undisputably cheaper than it was February, but the issue is that further falls might come before we see a genuine sustainable rebound. We need to climb back to 5455 to even escape “the bear” where the drop from the top would be less than 20 per cent.

As for actually making money across this market, that seems far away at this point.

Yes, a Morgan Stanley analyst is suggesting that we are looking at a mini bear market in what is actually an extended bull market.

Mike Wilson, chief equity strategist at the New York investment bank, says a secular (or very long) bull market began in 2011 and we are merely looking at the “end of a cyclical bear market that began two years ago”.

Who knows? This unlikely picture of the US market might turn out to be true. But for Australian investors, that is an awful lot to hope for.

The reality is that we were at an ASX 200 level of 6828 more than 12 years ago in November 2007 - a third higher than today.

Sharemarket patterns in recent weeks suggest that when you strip away the influence of day traders, algorithms and a cascade of institutional capital raising, investors are very much on the sidelines.

Most investors are waiting for the inevitable sea of red ink due when the most dreaded series of quarterly reports since the GFC begins next month.

While we wait for the numbers on the actual damage this worldwide shutdown has placed on listed companies, local traders sold off stocks Tuesday that might have gained if the RBA had cut rates again this week. It didn’t. It left the official cash rate at 0.25 per cent.

After the RBA decision, traders sold off yield favourites such as pipeline operator APA and telco Telstra. Along with the major banks.

There was also a move to lighten up on big retailers including Coles, Woolworths and Wesfarmers (Bunnings) which were all lower.

Nonetheless, there were some green lights on the main board such as Aristocrat Leisure up 5 per cent and Computershare up 8 per cent.

The day was also good for the big miners which are showing a strong performance in relative terms as iron ore prices remain strong on the back of a partial reopening of the Chinese economy - Rio moved up to $90 from $77 three weeks ago.