1306 Papermill Pointe Way
on May 14, 2020
We have cautioned that the expectation for a quick economic recovery has driven much of the recent stock market gains, and that if the expectation of a quick recovery was put in jeopardy, we could see a pullback in stocks. That’s partially what happened yesterday as stocks suffered their worst losses in weeks.
The “reasons” for the declines were a string of cautious comments on the economy and the stock market. Powell started it by stating the U.S. economic recovery would be slower than expected, and we could be in for a “prolonged recession.” That was complemented by famed hedge fund manager Stanley Druckenmiller (who has become more of a perma-bear in recent interviews) stating that the risk/ reward in stocks was the worst in his lifetime. Finally, another famed hedge fund manager, David Tepper, called the market the most overvalued since 1999. Those forces combined sent stocks lower, as they directly assaulted the idea of a quick economic recovery.
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