Is It Time To Buy??? - Part 12
Neil Hennessy is founder and chief investment officer of Hennessey Advisors Inc., a $6.6 billion publicly traded investment management company that offers 14 mutual funds to the public. November 2013, when the Dow stood at 16,000 he predicted the DOW would hit 20,000 within the next five years and in 2017 the DOW hit 20,000. When the DOW hit 20,000 in 2017, Neil said the DOW is on its way to 30,000. Three months ago, Neil reminded people at the DOW was on its way to 30,000 when he spoke at the Hennessy Funds 12th annual market outlook this past week. The financial markets are designed to go up over time, so Neil isn’t wrong…because he gave no time line for reaching his prediction.
Yesterday, the DOW fell over 2000 points, before recovering a bit and closing down 1,300 points. However, the DOW did close below the psychologically round number of 20,000, its lowest close since February 2017. We are talking levels not seen since Trump became president.
People in the world that are now inflected stand at over 200,000. In the US, the number of people infected are now over 5,000. And the kicker is, these are just the people inflected that have been diagnosed. And it’s going to get a lot worse before it gets better. So where does that leave the DOW, is further downside risk in the picture?
For Hercules Investments CEO James McDonald — who correctly predicted a major bear market on Yahoo Finance’s network more than a month ago in the early stages of the coronavirus outbreak — he thinks another 30% downside risk to stocks is very possible. Specifically for the Dow, McDonald thinks hitting 15,000 from current levels of just under 20,000 is in sight.
McDonald continued, “We believe that a normal valuation for a crisis of this magnitude still brings us down another 30%. I think there is a new risk in the market not a lot of people are talking about. If Donald Trump loses the confidence of the public and Joe Biden strengthens, there will be an introduction of uncertainty around the next presidency. The regime change must take us back below pre-Donald Trump levels, that is a Dow of 17,000, 16,000, 15,000.”
At this point, I’m of the opinion whoever is in the Oval Office is going to have a major issue on its hands. Yesterday, Treasury Secretary Steven Mnuchin said without action the virus pandemic could cause the unemployment rate to jump 20% or about 30 million Americans jobless. 30 million jobs is equivalent to the number of jobs in the retail sector or the number of jobs in the restaurant and hospitality sector.
Me personally, I’m looking for the DOW to hit 18,000, then a final target at 15,000. However, I hope I’m wrong on this one for everybody’s sake.
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted via Steemleo