Operator: Thank you for joining the WisdomTree weekly call with Professor Siegel. In this extremely volatile market, we want to make sure we provide advisors with the help and guidance they need. Please visit our website for additional insights, including the recordings of these calls. Today, Professor Siegel will provide a quick 15-minute update, and then we will open the lines for your questions. Please note that this call is being recorded and is for financial professionals only. If you need assistance, dial *0 and an operator will be happy to assist you. With that, I turn the line to Professor Siegel.
 

Professor Siegel: Thank you very much. Hope you had a good Memorial Day weekend. We had a great day. It could have been a little greater day if we didn't get some Tweets about anti-Chinese moves at the end, but nonetheless, being up 530 points is not bad and not really unexpected. It was really going up in Europe, which wasn't closed for Monday. It just carried through. Many of you may have seen me, I was on CNBC on the halftime report, rather extensive with Josh Brown. So, let me review the main themes because they all seem to be playing out very much as I have expected them to. The first and most important main theme is the tremendous increase in liquidity far beyond what we got during the financial crisis. The M1 money supply is now up more than 25%.

I've never seen any increase approaching that. In my opinion, the market is looking at all that money and saying, once it's locked down end, it's going to be spent. It's going to be spent buying goods and it's going to be spent buying assets. With the fed keeping the rate at zero and people still staying in long-term treasuries, because they've got a short-term hedge, and that's what they have. Terrible yield, but short-term hedge. There's no alternative in the fixed income market. A lot of it is and is going to be flowing into equity. Now, in the terms of the types of equity it's flowing into, that depends. If it looks like the economy is reopening, that will blow in to the ... Well, we would call them the value stocks. Those that are beat down the most, the non-Nasdaq stocks, the non-tech stocks.

If it looks like the economy isn't opening some fast, then the tech stocks will outperform. Today over the weekend, we got a lot of re openings on the economy, not only in the United States, but really around the world. As a result, it's not surprising that we've had the so-called Dow stocks, value stocks outperforming. Nasdaq was only up .17%. The Russell 2000 which has been beat unmercifully, it was still up 2.8%. It was up almost 4% earlier in the day. So that's the scenario. The scenario is the liquidity is going to be flowing in , and then generally give the lift to stocks. If it looks like it's a reopening lift, you're going to move towards the small stocks, the Dow stocks, away from the tech. If it doesn't look like it's going to be reopened as fast, then you're going to get through. You're going to get the reverse play. So that's basically how to tell the game right over there. I was asked, do I think it could hit all time high? Today? Not today. Today, it won't. This year, S&P most certainly it could.

In fact, if we do not get a second wave, and there could be many reasons why we don't get a second wave. It could because we got effective antivirals. It could be because we have vaccine. It could be because there just isn't a second wave. We could go through the reasons. Then it is in my opinion, more likely than unlikely that we will get an all-time high in the S&P. It isn't because earnings are going to be at any high. It's going to be that interest rates are much lower and the liquidity is just going to try to find someplace to go. All that liquidity is going to boom the spending. Now we've already told the story. I will repeat this story of what's happening, going to happen to fixed income.

It looks great now. It looks okay now. Again, you're going to get the long bond lingering between 65 and 70 basis points. If the reopening really happens and it goes to 80, 90 and then if prices start rising, but people will still cling to treasuries. Treasury has been the hedge asset. So, they'll suffer and they'll say, "All right. It's like I'm paying an insurance premium. It's expensive, but it paid off once. How long am I going to keep on holding them?" Well, until they get saying, "Hey, you know what?" Then there's the FOMO. How many money managers are participating in this rally?

Not many. For those who've been listening to these weekly calls, you might remember what I said four or five weeks ago. What I said was, all those people who are boasting that they got out of stocks somewhere before March 14th, that was the weekend where the panic hit, and avoided the 20 to 25% further decline in stock. But of course, what I said back then was, how many of those have gotten back in versus the buy and hold people. Nasdaq is down 4% from their all-time high and the S&P down 11. This type of investor behavior plays out again, and again, and again, in every market sell off that we have. This one more acutely than others. Some of them are going to be looking around and say, "Whoa. I made a great call and I got all my customers out." But guess what? I didn't get back in. Guess what? My hedge is gone. How much am I going to feel the pain before I just got to get in, just to protect some performance this year?

Again, not surprising. Let's look a little bit on the virus front itself. Not bad. I won't go in. Merckwhich has made a majority of those successful vaccines over the last two decades. Actually, now has a vaccine that is ready for stage two trials. I won't go through all of them. They're all being accelerated into trials. We have tens of thousands of Americans and others standing in line and saying, "I'll be vaccinated and I'll be ready to take the virus and see if it works." Which actually, is an important issue because if the virus really wanes in the summer, which it could for just a climate illogical reasons, not just social distancing. You might not get enough people to really do a full stage study. That actually is the reason if you remember that Remdesivir's trial was halted in China, because when China halted the rate of infection, they just didn't have enough them to test it. So that becomes an issue. It doesn't become an issue when you have people saying, "Okay and then you can give me the virus. Give me the vaccine, wait three days, and then give me the virus."

In terms of the trials, that could happen. Secondly, we are not seeing a spike yet in Florida. We are not seeing a spike in Georgia. We are not seeing a spike in Texas. Certainly they're not on the downward, sharp downward, curve that the Northeast or New York went through. We were the first with the wave. And I wouldn't say that the lack of spike in the states that opened up first is... That's now in the hopper, and we see it. There's still time that it might take, so I would like to wait a couple more weeks. But we aren't seeing the spike. The wave hit the Northeast. Now it's going elsewhere.

When you take a look at total cases in the U.S., You see a slight decline. You look at deaths, you see more of a decline, not anywhere near the decline that you see in deaths, for instance, in New York or New Jersey or some of the other areas, because they went through first, and the virus is sort of spreading there. But even if you look at other states and you take moving averages of the deaths and in many cases moving averages of the new cases, you do see signs of decline. And that is also important.

Secondly, again, we definitely are opening up everywhere. I mean, I don't know any country that's still in extreme lockdown. I mean, I'm not denying that there will be a few countries that are going to open a little bit too soon, that maybe they should have gone a little bit later, but you see the opening that is actually happened in Europe. And even Sweden, again, which although has suffered more deaths and more cases than its surrounding Scandinavian neighbors, is still on the decline if you take moving averages either of the new cases or you take moving averages on the death side. So all the trends are favorable.

The big question is, okay, we might be all right in June, and we might be all right in July, maybe in August, and then comes September. And then the weather gets cooler. You know the scenario. What is going to be available in terms of therapeutic? What is going to be available or if it's going to be available in terms of any vaccine? By the way, we don't need universal vaccines. We only really need to vaccinate some of the frontline workers and those that have to mix as well as the most vulnerable. And then that in itself will lower the R0, which is the infectivity ratio, down to a point where we would have what would be called effective herd immunity.

I mean, a lot of those numbers are not exactly known right now. So basically, I'm not surprised. I still think it's going to go forward. Yeah, a war with China is still... We still don't want that now, but as I told you three weeks ago, there's no question that Trump is going to play the China card for the election. Well, we're only a couple months away from the convention and only five months away, or a little bit more than five months away, from the election. So we'll see what has to come forward there. Let me just end by saying there's talk on and off about a so-called fifth package. There's no real rush.

Markets have recovered. So the whole question is, and at this point, we don't have any in bankruptcies from the state and local authorities, and there's bridge loans, etc., and so on. I still think there will be more that they will sort out when the data is in about what's called excess expenses that cities do have as a result, and that will come into a further package. But there seems to be no rush on that, and as I mentioned to you last week, that is a much more contentious political issue than getting the first, the Cares Act, off the ground.