A short note today, mostly brimming with bad news.

First off, the highly respected European equities team at Morgan Stanley have brought out a quick note on the state of European dividends. The message, as you might assume, is terrible. They argue that there is “unprecedented pressure on EU dividends. Bank and Energy stocks account for 26% of EU payouts while other company announcements so far suggest that a further 17% of European dividends could be at risk.”

I’ll return to the subject of dividends next week when I catch up with Andy Lapthorne at SocGen and his Quality income screen. But the message is simple – classic equity income strategies offer very little protection in this deadly market environment.

As for US equities a short email note from earlier in the week caught my attention. It’s entitled “The Real Stock Market Crash Hasn’t Begun Yet – Be ready now and up to 2664 on the S&P 500” and was penned by a certain James McDonald, CEO/Chief Investment Officer, Hercules Investments. I can’t say I know much about his firm but the analysis – although a little technical for my liking – sounds credible.

Needless to say, from the headline, the medium term prognosis is grim, with the dead cat bounce of last week, a diversion from the impending next stage of the sell off, which will in turn be prompted by a roll call of bad news days.

McDonald’s advice sounds sensible. He thinks prudent investors should consider:
• Hedging their portfolios for further downside in equities
• Move to cash
• “Preparing for a further loss, at a minimum, to an extent the S&P 500 retests its recent low. More realistically the S&P 500 will reach 1800 for a full correction of 46.95% from its all time high. This would coincide with the Dow Jones Industrial Average (DJIA) reaching the 15000 level, for a similar retrenchment from peak to trough.”

That level of 1800 for the S&P 500  feels like a sensible low to me and chimes with the worst-case analysis from outfits such as SocGen (and others) which suggest similar lows.

And what might precipitate this second leg down? McDonald maps out a dismal calendar which consists of the following days to watch out for:

• Fri. Apr. 3: ISM Non-manufacturing Index & Markit Services PMI (March)
• Wed. Apr. 8: FOMC minutes
• Thu. Apr. 9: Weekly Jobless Claims (Apr. 5), PPI (March), Consumer Sentiment (April)
• Fri. Apr. 10: CPI (March)

Talking of dead cat bounces, I can’t let pass the bounce in oil prices on talk of a deal between the great energy powers.
And unicorns are real and pigs fly. If you believe this tittle-tattle then you’ve been smoking some weird stuff.
I can see no earthly reason why the Russians would want to play along with this accord. Anyway we shall see over the next few months…That said I will return to the subject of dirt cheap energy stocks next week.

Last but by no means least, I return to the subject of the developing world. I will repeat again, that I think the gravest humanitarian crisis we are facing is potentially in the developing world, and especially Africa and MENA. I cannot underestimate how important it is that the developed world develops a multilateral response now.

On this subject I’ve been leaning heavily for numbers and analysis on the excellent regular missives from Renaissance’s Chief Economist Charlie Robertson. His latest looks at Africa and MENA.

The health data in the table below makes for very grim reading, although the caveat is that much of the data is either very old or not entirely trustworthy. But it is at least a stab at estimating the public health capability of many states.
Robertson’s message is simple – if you want to avoid a calamity, lock down very early on so you can minimise the loss of live. His conclusion? The countries best positioned to cobble together a sensible response are South Africa and Russia “while Turkey is an unfolding disaster. Nigeria and Kenya still have at least a week (if their testing data are reliable) to decide when or whether to do a lockdown, and partial lockdowns in Lagos and Abuja should help in the former.”. Fingers crossed and let’s start sending money and help to as many organisations as possible in this space.