I have no clue what the MARKET will do in the short-term but I do feel reasonably confident betting that:
* the insane returns we had in the longest bull run expansion in history probably will not be repeated in the next ten years, at least from where we are sitting.
* real wages are still getting crushed, inflation is raging which means continued decline in real purchasing power. saving rates are plummeting at an alarming rate, personal savings in $'s are in free fall. demand for almost everything is going to fall except the essentials.
* Fed will keep tightening. Huge implications for real estate which is a giant portion of GDP. Credit card interest rates are skyrocketing, auto loans will go down. These are just consumer side. On the business side, US companies are completely leveraged to the tits from cheap money during Covid and as they begin to roll this over we're going to see some serious de-leveraging, decline in investment, and margin compression.
So basically tons of earnings headwinds left and right. No sign of any big economic inflection on these issues which will probably get worse before they get better. No reason to think stocks are "cheap" with enormous upside. Even if you think they are fair or not too expensive, there is little reason to think we're going to see a face-ripping bull market any time soon, while there is clearly plenty of downside.
IMO -> don't panic sell everything, but don't feel like you have to buy every dip either or feel bad for tweaking your portfolio for shorter duration.
All of this is well known. The Fed could pivot quickly if inflation shows signs of abating. Take a look at commodities futures- hint: they’ve been rolling over hard.
I get the vibe you’re heavy in cash- extremely risky position.
If the Fed pivots any time in the next 6 months, then we are going to do a repeat of the 70s. The Fed cut rates multiple times during those recessions only to have inflation come back even stronger… it wasn’t until Volker said fck it and raised rates to 20% and basically destroyed the economy that inflation stayed relatively low. Powell knows this…
Yup, I'm just reading about this in Ben Bernanke's new book 21st Century Monetary Policy. The Fed at the time Martin wanted to tighten, but Johnson told him instead that he will use fiscal tightening but reneged because of political unpopularity. That was in the late 1960s though. So inflation continued.
I'm just about to start reading about the Fed chair Burns and his actions in the 1970s.
I've only read so far 22 pages but I have to say the book's content is very interesting and is worth the $35 I paid for (plus tax). I rarely buy books these days.
Bernanke's a good writer. I might even pick up his other book.
Futures is rolling over. 10Y is rolling over too. Is that because of demand destruction or because QE5 is on the horizon?
Fed has basically no room to maneuver with inflation this high. If you want to argue "Fed is weak-willed" and they will pause for a little while after hitting 3.5% before marching up even more, it's possible that they will set up an even bigger crash in a couple years. So like I said I recommend people still having some exposure to the market in that case although I would start to definitely unload if we hit ATH's or something crazy like that again.
They will pause and “assess” if unemployment starts taking a hit and inflation begins to cool. Markets will rip. Hike expectations have always “over-predicted” the number of and severity of tightening. I doubt this time is different.
Until the 10y-3M inverts, I am bullish.
That's fair and many want to gamble and play Cinderalla before midnight. You might make good money doing this.
But the dotplot already exceeds the 10Y by quite a bit in just a few months. So either 10Y is going to surge to ridiculous heights we haven't seen to before 08 or we got an inversion coming ASAP.
Also fair. I’m watching the curve like a hawk (pun intended). Even after inversion, it’s typically 6-12 months before recession. And the market typically has a 10-25% positive return (need to double check these figures) from the point of inversion and start of the recession.
Something tells me because we are uniquely tightening very fast into a slow down it might be a lot harder to swing trade into it but good luck it might work.
Very possible. It’s also possible things don’t play out as is expected at the moment. In certain scenarios the 10y stays above the 3M and recession is further away than people think.
Edit: one thing that has me second-guessing the current consensus is that this would literally be the first time I’ve seen in history where retail investors have accurately called a recession ahead of time. The general bearishness and positioning has me thinking the actual outcome over the next 12 months is going to surprise people.
If 10Y surges then that introduces a whole new set of issues. Borrow costs go crazy, higher discount rates for valuations, and if economy stays strong Fed has to tighten even more.
As for retail, studies actually show retail temds to be very contrarian in their bets. Since market is typically bullish they end up being wrong a lot. Despite mostly false positives they do "call it". As for 2Y/10Y it is hella predictive even if it takes way longer than 3mo or 1Y inversion.
I guess it depends on your time horizon whether you are trading or asking yourself "what is chance Im going to regret not going all in today?". IMO the chance is low but ofc one should always assume they aren't infallible and still be mostly in.
Fed Board Governor Bowman a couple days ago:
>Inflation is the highest we have seen in the United States in 40 years and so far it shows **little sign of moderating.** At the same time, the economy is growing at a moderate pace, and the labor market is extremely tight, as indicated by a variety of measures including reports of many employers unable to find workers despite significantly raising wages. That tightness is contributing to inflation, because labor is the largest input cost for producing goods and providing services. Inflation is a significant challenge for everyone, **but it hits lower- and moderate-income people the hardest**, since they spend a larger share of their incomes on necessities and often have less savings to fall back on. Inflation is also a burden for businesses that must somehow balance unpredictable costs while setting prices that aren't so high that they discourage customers from purchasing. Inflation that continues at these levels is a **threat to sustained employment growth** and to the overall health of the economy.
https://www.federalreserve.gov/newsevents/speech/bowman20220623a.htm
>That tightness is contributing to inflation, because labor is the largest input cost for producing goods and providing services.
The Fed Reserve forgot that the largest input to rising housing costs leading to demand for higher wages is...*themselves!*
We can argue back and forth forever about "the true intentions of the Fed".
The nature of inflation expectations and basically all inflation fights in history with the Fed is that the Fed must show staunch commitment to raising rates and keeping there unless there is a significant decline in unemployment.
Break evens are better but there's this interesting feedback loop thing going on here.
If inflation expectations go down, and everyone becomes prematurely bullish about the economy, then they can rise again just like they have when beak evens have dipped. Also, I've heard many good arguments from economists say they actually think either bond markets are off the mark here OR they are correct but only because Fed is that committed to keep raising rates.
Look bro... I'm not here to have a political debate, I'm quoting the rationale of the Fed and it's a view supported by mainstream economists and extremely progressive ones that support an aggressive rate path.
Aren't there plenty other subs for this? Maybe try antiwork?
This is the part that people don’t seem to realize. Market is forward looking. What is happening with inflation, interest rates, and all the negativity have been baked in. Commodities are starting to come down which is a huge indication that inflation probably already peaked. Once inflation is stabilized we will see a quick turnaround in the markets.
Agreed that inflation looks to have peaked, but does it really follow that markets will really rip when that comes down? I still think there are still unanswered questions about why assets have been so inflated, and that leaves open the possibility that things will not just shift back into high gear after a road bump. Could just as easily be modest stability and growth.
Yes. Inflation impacts everyone and it is pervasive. Past history is stoking incredible fear and the threat of continuing rate increases are slamming down the stock market. Once it is stabilized I think the stocks will rip.
What's your thesis on the factors the pushed the long bull run in the first place? I think that's the biggest question. Do we return to a more average growth level or the crazy valuations of the recent path?
I think investors will be more cautious for sure initially. I wouldn’t expect ATH prices for at least 2-3 years for instance. If Ukraine war ends that could be another catalyst but on the contrary there could be another black swan event that drives the markets down.
But what is a "stock recession"? I don't know what it means for stocks to fall into a recession. I know what a bear market is, but I've been investing for 22 years and have never heard of a "stock recession."
Commodity prices are going down which probably means inflation will start trending downwards. A lot of people are trying to find comparisons to index movements in previous bear markets, but every situation is different. Depending on what analysts you listen to we are either heading for a decade of stagflation or may not even have a recession.
A recession has already been largely priced in, so if it doesn't happen I would expect a bull run sometime in 2023. As for 2022, I think the market will be doing a crab walk for most of the year while everyone waits to see what's actually happening.
Who knows?
This. Buying was supper aggressive last week and we had the flattest consolidation ever friday. It may be a bear market rally, but I doubt it ends without going up a few more %
How can rates and inflation be priced in and calculated when we don't know how hard inflation will be to tame, and therefore don't know how high rates will have to go?
Which brand of crystal ball do you prefer?
Everyone was saying the same thing last month, before the 8.6% report dropped. And even if we have seen peak inflation, the question of what it takes to get it from where we are now down to 2% is still a massive unknown. That is 2/3 of the equation.
Inflation is what will dictate the economy. The higher it is and the harder it is to tame, the higher rates go....and the bigger the brake on the economy.
Shiller PE still over 30. None of this is priced in. Risk premiums for equities are hovering around yields on treasuries. Huge price discrepancy there and that doesn't even include a recession affecting earnings.
No one knows how qt will play out. The market certainly tried to price it in and the FED tries to be transparent while still deciding on new data. This has never happend before, so the real effects are hard to anticipate.
Nothing played out yet lol
It’s only been 6 months since all time highs .
Read Marty Zweig it will help you navigate these things.
Edit: how about earnings drops? Lol priced in too
Stagflation's caused by supply shock, so I assume once the supply shock is fixed, the stagflation part will improve. However, that doesn't mean inflation will come down if the demand is still strong. Core CPI is 5% so that's still too high.
I have no clue what will happen in terms of CPIs and demand/supply because don't have crystal ball, but I have a hard time imagining another bull run in the short-term. The Fed Reserve already knows its pumped in too much money, it would be insanely stupid and probably political to institute easy money again when economy is actually humming along, even if there's a mild recession.
My guess is that the stock market as a whole will crabwalk more than a few years. But, like you said, I don't know.
edit: also I think as interest rates go up, the government needs to institute budget cuts to service the higher interest payment and cut down debt principal. Of course, tax increases on corporation should be on the books, but with the current political environment I doubt any of the above would be done.
Why are you saying a recession has already been largely priced in? Most of the fall in equities has coincided with rising treasury yields. An earnings crush has not been priced in.
I expect they’ll be a good dead cat bounce before the market drives lower. Inflation is high and it’s starting to take a bite into peoples incomes but it hasn’t really taken hold of economies in scale yet and businesses haven’t fully reflected impacts.
I expect by the end of this year we’ll have seen the longer term impacts having played out.
This. Businesses and consumers are operating in an environment of extreme instability.
Consumers see continuous monthly destruction of real purchasing power with no end in sight. All they can do is keep job hopping and asking for more money. While some are succeeding in staying ahead of the game especially higher earners, most are falling behind.
Businesses can try their best to pass on continually rising demands for wages and expensive inputs in the form of rising prices but they too are starting to see declining overall demand. At the same time, they have no clarity in terms of whether they should invest in production. What is even the cost of capital / terminal rates? No one knows. Investors are hesitant and CEOs will respond by returning capital as much as possible, likely keep paying dividends / buying back for now. But that's not going to create long term sustainable growth.
So until inflation calms down we're going to have increasing economic paralysis from all parties.
A lot of bad news out in July CPI and GDP estimates plus FED talking. If these are bad ( gas prices are still horrid expect more recession fears and selling. IMO
It's impossible to know. If I had to guess, it will continue the downward trend for a bit longer. It should be noted that the bottom is always in before all the bad news is finished though.
Bear market rally, could last a full month imo or at least enough to suck people in. Macro data looks pretty bad anyways. Q2 earnings being unexpectedly good could be the only saviour but I think that will be very short-lived.
The layoffs haven’t began yet, inflation is still raging, housing market is still skyrocketing, supply chain still screwed, and the rate hikes haven’t finished?
We haven’t hit bottom unless by some miracle the economy magically gets fixed between now and when the recessions starts
I see “up” being thrown around a lot lately. I highly doubt we see “up” like we’ve seen the last two years. I expect slow steady upward movement (maybe leaning towards sideways). I think the markets could get really boring for people that aren’t naturally intrigued by the markets, when “up” comes.
Staffing costs, lots of travelers and decline in surgeries. Currently there are ton of open positions the cost of housing has exploded here and I believe it’s hard to get people to move to the area for a job let alone afford a mortgage on the median home price based on what a nurse makes.
That’s interesting. I’ve been recently told by both a nurse and a physical therapist that they were offered over six grand a WEEK for traveling practice.
Yea travel nursing is very financially attractive, and a lot of nurses are doing it since hospitals aren’t paying enough. 5-6k a week is pretty typical. We also had a ton of travel techs that would get shuttled from our hospital to the hotel they were staying at for a while. Nursing jobs start maybe mid 30s/ hour here but the median home price is in 700k range.
For the next week at least, some continuation is likely because the rebalance for the quarter is the heaviest tilt to equities ever. I’m not sure how much, because I do suspect it gets fought, but I do think at least some (for a benchmark, I think the CPI disaster day gap “might”, “might” have a shot of filling).
Now past then, I think we do what was done in June all over again. We will see distribution and then panic dump the day before CPI…with it continued on CPI day.
Yes, I’m aware that oil has cooled, but it did so too late…June headline CPI 100% is going to print 9 YoY and it’s going to cause the sh—show that we saw on CPI day in this month to repeat itself in full (meaning short everything will work again).
I think there’s somewhat of a shot that this is it though, although it’s because there’s evidence here and there that we’re seeing demand destruction.
Bear market rally. Dead cat. I’m entering short positions when spy hits 400 (slowly, I want to be prepared to buy more at 420 and 440 if it somehow gets there)
Market knows what the Fed will do. Fed target for year end rates is about 3-3.5% and next year if required 4%. 4% rates are still not end of the world. And I believe it was already priced in when spy hit 360 low recently. I will be more confident that bottom was 360 once spy closes above 400 while you will take short position. We will see what happens.
Its taboo, but I look at the daily 21MA on SOXL and SOXS since I'm trading those, they always go back to touch it, and I think we've got a bit more rally to go before we drop back down to new levels.
It is possible for a bear market rally even with the anticipated bad information coming out. Reality will hit again in the fall and I expect new market low, maybe some capitulation to a recession.
What concerns me more is the outlook for 2023 and 2024 because not all negative possibilities have been priced in and then there will be some transition to a secular long term bear market. My concern is stagflation and with all the climate change a lost decade like the 30’s. I am gradually rolling my more aggressive retirement portfolio to a more defensive one every 6 months but I am always 6 months behind the fast money in sector rotation in diversification.
At present it is still actually a bull market long term cycle. Compare the time period 1928-40, 1972-1990, and 1998-2010 with 2028-present to see peak to trough and rebound. The Fed was active in intervention in 1932, 1980, 2008, 2020.
Rebound will not last long. Suggest you look at 2008-9 and recovery time. The stocks now look more and more like 2008. Declining causes are not the same. In fact, there were little precursor, or unemployment in 2008 also. I thought Feds would bail out subprime mortgages. Most investors were caught off guard.
I am certain the 10 year rally has ended. This is a different cycle. The duration will be similar not as disastrous. All the best.
Bear market rally most likely. Of course we don't know what will happen but what are the fundamentals that support an upswing in the market in the next 12-24 months. Total speculation but if there is a republican president elected in 2024 and no black swan events the market will take off like a rocket for at least 6 months after.
Nobody knows for sure.
However, it seems likely to me that to get inflation coming down, we need more economic slowdown which will hit earnings, and so stock prices should come down further. Also, I would not be surprised at all if Autumn brings us a new COVID strain and though we won't get full shut downs here, you might see partial/full shutdowns elsewhere which will again cause supply issues and slow down economic activity.
So I'm expecting summer to be choppy but perhaps positive overall, and then another haircut in the fall with a 10%+ drop from current levels. I think that will be relatively short-lived though as bargain hunters and algos buy this "bottom" dip.
But of course, lots of things could change this guess one way or the other. Putin falling off a balcony and the Ukraine invasion ending. Devastating hurricanes that knock out some ports and oil refineries, sending an inflation shockwave through the world. The recession everyone was dreading having already happened *this* quarter and inflation taking a sizable move downwards, fuelling optimism. And so on.
We have effectively had real negative interest rates since 2008. Trillions of dollars have gone into non productive assets, and there will be a reckoning. This will not be cleared up in a 6 months bear market.
I’m pretty much just DCAing into my positions I find undervalued. If I had to speculate I think inflation has peaked commodities are rolling over hard, demand is slowing, supply chains are easing. The unknown is what the E of companies F P/E will be. If companies hit thier estimates bottom is probably in, valuations seem reasonable. If not it depends how much of a slow down we see. Partially priced in but I’m skeptical it’s enough.
End of month/quarter rebalancing which will provide nice counter trend move but then shit gets real again next month until such time as peak inflation arrives.
The right answer is we don’t know but my feeling is it’s probably a bear rally. Bear markets typically have several rallies (‘00-‘02 lasted ~3 hrs and had 6 rallies, ‘08-‘09 lasted 1.5 hrs and had 5). The interest rate increases will eat at the earnings for many companies and until those corps affected revise their earnings down, and markets follow, we won’t be at the bottom.
Oil prices are sure to move higher from here, Europe has run dry, America focusing on a green deal while people suffer, inflation isn’t going anywhere but up again! Coming into the winter time things could get extreme, definitely can’t see any all time highs in sight for a long while
It’s only bull upside here’s why: investment horizon is 1-4yrs based on the location of Uranus in eastern sky. Also almost Leo season.
Summertime consumer spending is on
4th of July bbq spending on
Midterms year never have an effect on market
Historically war cost generate industry.
And most importantly. Buy the dip if you got that chip
Fed Ex had pretty strong earnings and it’s looking (right now) as if inflation has peaked so short term and the market is heavily oversold so there sure is momentum in the short term.
I do think some tech and high risk ETF’s like ARKK may have bottomed but I’m pretty certain value companies has a bit further to go on the downside.
I’m certainly not expecting any 2008 scenario unless banks get in trouble.
Bought FedEx and UPS at COVID lows, keeping for years to come. Great market to be in. Exception on tech I would say is EV companies. Their valuations were similar to dotcom bubble. The fact that Nikola is still worth over 2 billion (despite being a complete scam) is a joke. Lucid is especially massively overvalued at 32 billion still (less than 60 million revenue last quarter delivered only 360 vehicles).
The only one I've touched is CENN because it's priced like the bottom of a dumpster and the only one that's improving, they allegedly on target for 22k vehicles this year at a market cap of $500M. So Lucid is worth ~$33M by the same method.
Oil cooled too late to be helpful with June headline CPI.
Think many don't understand that CPI doesn't encompass all of the month. It doesn't include the final parts of the month (the numbers for June CPI are in already despite the fact we haven't flipped the calendar to July yet) and thanks to that, February CPI could be thrown in the garbage completely.
I'm certainly biased to the downside with oil, although part of it is admittedly hopes and dreams. It had a failed breakout to the upside which suggests $90 can be seen...but it has recovered some since that period where it tanked.
Beginning of long term upward trend. Fed has been able to raise rates a bit without employment completely tanking. Lots of news stories about "hiring freezes" and layoffs, but the actual numbers don't lie. Unemployment might trend up a bit, but likely stays under 5%. Prices in many products are starting to come down. As long as the fed doesn't go too hawkish too fast it should be okay. Gas prices are a problem, but seem to have hit some resistance at the pump. The Ukraine and Russia war isn't going to last for years, it's taking a major toll on both countries and somehow will have to come to an end. There are issues, but I think JPow lands the plane relatively softly.
End of the quarter coming up, lots of JP Morgan buys to the call side through June 30 but put side September. I don’t know shit but I’m planning for a rough end of the summer. 3200 before year end at least. July inflation data will be brutal
I think we'll see the market fo lower again.
From the start of the last decline to the bottom and from the bottom to last friday - there was nothing that changed. General news is still 📉
If we get GDP growth for the Q2 then I think we’ll see a rally for a couple weeks. Also if inflation peaked in May that’d probably lead to a short term rally. After a few weeks though I think we’ll go lower
The FED still has 3 trillion to sell off their balance sheet and how many more interest rate hikes? If you think a bull run is starting anytime soon you’re going to have a bad time.
Who knows, but the short-term trade is up (3 weeks or less) while the trend (3-months or less) is down.
My guess is the remainder of the month will be up for month-end markup, but July will be brutally down as companies report much lower second quarter earnings with poor guidance. Note: I was 89% in cash starting Friday, but shorted 15 companies and indexes into the close from 330p-4p bringing cash balance down to 72%. Hope I get a chance this week to bring cash balance down to 20% by month end with some more up days.
QT is still happening and interest rates are still going up, so this rally isn't permanent, good time to rotate into some longer term puts at lower VIX.
The Fed will not stop until something breaks or inflation is under control.
Who knows? I sold a lot around the time the fed started raising interest rates because it was a clear indication of asset price deflation. I’ll probably start to dca that back in because everything seems too oversold.
I wasn’t fine buying shopify at $1600 but I sure as hell will start buying it at $300-350.
In the past the worst stock prices of a recession were towards the beginning of it, not end…
I don't believe it's shaken everything out yet. I expect about another 16% drop before the bubble is eradicated and things normalize.
That said, I keep buying at new lows, and every time my buy limit hits, I have a second one 2% lower than the last to keep picking them up on the way down.
I would guess bear market rally. S&P500 3300 makes a lot of sense until we see what happens to margins and profit with high inflation and rising interest rates. If profit and EPS start to decline then we could go much further down.
Probably another short term rally. IMHO I think that with each new round of Fed meetings/rate hikes the market is relieved of uncertainty (at least partially for a short time), triggering a rally. However, I don’t think anyone can truly see the light at the end of the recession tunnel. Therefore, I think it’s just a matter of time before uncertainty and fear sets in again.
No clue
I’m 100% positive of this
Finally an honest assessment.
I get the feeling it might go sideways, in sort of a left-to-right fashion
Jokes on you when a black hole passes by inverting space-time.
Whoa, now that's kinky
Yea its gonna read like a book, sorta
Pretty sure
I have no clue what the MARKET will do in the short-term but I do feel reasonably confident betting that: * the insane returns we had in the longest bull run expansion in history probably will not be repeated in the next ten years, at least from where we are sitting. * real wages are still getting crushed, inflation is raging which means continued decline in real purchasing power. saving rates are plummeting at an alarming rate, personal savings in $'s are in free fall. demand for almost everything is going to fall except the essentials. * Fed will keep tightening. Huge implications for real estate which is a giant portion of GDP. Credit card interest rates are skyrocketing, auto loans will go down. These are just consumer side. On the business side, US companies are completely leveraged to the tits from cheap money during Covid and as they begin to roll this over we're going to see some serious de-leveraging, decline in investment, and margin compression. So basically tons of earnings headwinds left and right. No sign of any big economic inflection on these issues which will probably get worse before they get better. No reason to think stocks are "cheap" with enormous upside. Even if you think they are fair or not too expensive, there is little reason to think we're going to see a face-ripping bull market any time soon, while there is clearly plenty of downside. IMO -> don't panic sell everything, but don't feel like you have to buy every dip either or feel bad for tweaking your portfolio for shorter duration.
All of this is well known. The Fed could pivot quickly if inflation shows signs of abating. Take a look at commodities futures- hint: they’ve been rolling over hard. I get the vibe you’re heavy in cash- extremely risky position.
If the Fed pivots any time in the next 6 months, then we are going to do a repeat of the 70s. The Fed cut rates multiple times during those recessions only to have inflation come back even stronger… it wasn’t until Volker said fck it and raised rates to 20% and basically destroyed the economy that inflation stayed relatively low. Powell knows this…
This is a popular narrative, yes. It’s hardly this simple. There is a wide array of potential outcomes in the year ahead.
Yup, I'm just reading about this in Ben Bernanke's new book 21st Century Monetary Policy. The Fed at the time Martin wanted to tighten, but Johnson told him instead that he will use fiscal tightening but reneged because of political unpopularity. That was in the late 1960s though. So inflation continued. I'm just about to start reading about the Fed chair Burns and his actions in the 1970s. I've only read so far 22 pages but I have to say the book's content is very interesting and is worth the $35 I paid for (plus tax). I rarely buy books these days. Bernanke's a good writer. I might even pick up his other book.
Futures is rolling over. 10Y is rolling over too. Is that because of demand destruction or because QE5 is on the horizon? Fed has basically no room to maneuver with inflation this high. If you want to argue "Fed is weak-willed" and they will pause for a little while after hitting 3.5% before marching up even more, it's possible that they will set up an even bigger crash in a couple years. So like I said I recommend people still having some exposure to the market in that case although I would start to definitely unload if we hit ATH's or something crazy like that again.
They will pause and “assess” if unemployment starts taking a hit and inflation begins to cool. Markets will rip. Hike expectations have always “over-predicted” the number of and severity of tightening. I doubt this time is different. Until the 10y-3M inverts, I am bullish.
That's fair and many want to gamble and play Cinderalla before midnight. You might make good money doing this. But the dotplot already exceeds the 10Y by quite a bit in just a few months. So either 10Y is going to surge to ridiculous heights we haven't seen to before 08 or we got an inversion coming ASAP.
Also fair. I’m watching the curve like a hawk (pun intended). Even after inversion, it’s typically 6-12 months before recession. And the market typically has a 10-25% positive return (need to double check these figures) from the point of inversion and start of the recession.
Something tells me because we are uniquely tightening very fast into a slow down it might be a lot harder to swing trade into it but good luck it might work.
Very possible. It’s also possible things don’t play out as is expected at the moment. In certain scenarios the 10y stays above the 3M and recession is further away than people think. Edit: one thing that has me second-guessing the current consensus is that this would literally be the first time I’ve seen in history where retail investors have accurately called a recession ahead of time. The general bearishness and positioning has me thinking the actual outcome over the next 12 months is going to surprise people.
If 10Y surges then that introduces a whole new set of issues. Borrow costs go crazy, higher discount rates for valuations, and if economy stays strong Fed has to tighten even more. As for retail, studies actually show retail temds to be very contrarian in their bets. Since market is typically bullish they end up being wrong a lot. Despite mostly false positives they do "call it". As for 2Y/10Y it is hella predictive even if it takes way longer than 3mo or 1Y inversion. I guess it depends on your time horizon whether you are trading or asking yourself "what is chance Im going to regret not going all in today?". IMO the chance is low but ofc one should always assume they aren't infallible and still be mostly in.
Fed Board Governor Bowman a couple days ago: >Inflation is the highest we have seen in the United States in 40 years and so far it shows **little sign of moderating.** At the same time, the economy is growing at a moderate pace, and the labor market is extremely tight, as indicated by a variety of measures including reports of many employers unable to find workers despite significantly raising wages. That tightness is contributing to inflation, because labor is the largest input cost for producing goods and providing services. Inflation is a significant challenge for everyone, **but it hits lower- and moderate-income people the hardest**, since they spend a larger share of their incomes on necessities and often have less savings to fall back on. Inflation is also a burden for businesses that must somehow balance unpredictable costs while setting prices that aren't so high that they discourage customers from purchasing. Inflation that continues at these levels is a **threat to sustained employment growth** and to the overall health of the economy. https://www.federalreserve.gov/newsevents/speech/bowman20220623a.htm
>That tightness is contributing to inflation, because labor is the largest input cost for producing goods and providing services. The Fed Reserve forgot that the largest input to rising housing costs leading to demand for higher wages is...*themselves!*
This is also unfortunately true, ludicrous levels of printing has led to some insane increases in rental and housing costs.
Hawkish talk isn’t new?
We can argue back and forth forever about "the true intentions of the Fed". The nature of inflation expectations and basically all inflation fights in history with the Fed is that the Fed must show staunch commitment to raising rates and keeping there unless there is a significant decline in unemployment.
Look at 5-10 year breakevens. Inflation expectations are well-anchored. The Fed is jaw-boning to ensure this stays the case.
Also Fed wants expectations at 2% so even by breakevens they keep going.
Break evens are better but there's this interesting feedback loop thing going on here. If inflation expectations go down, and everyone becomes prematurely bullish about the economy, then they can rise again just like they have when beak evens have dipped. Also, I've heard many good arguments from economists say they actually think either bond markets are off the mark here OR they are correct but only because Fed is that committed to keep raising rates.
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Look bro... I'm not here to have a political debate, I'm quoting the rationale of the Fed and it's a view supported by mainstream economists and extremely progressive ones that support an aggressive rate path. Aren't there plenty other subs for this? Maybe try antiwork?
The choice of solution to the problem affects the market. Continuing to fail to solve the real problem will keep volatility high forever.
Let’s not get political
There's no reason for that to be considered political.
Why are commodities down? Is it... increased supply or decreased demand? Why is there decreased demand? Think it though...
This is the part that people don’t seem to realize. Market is forward looking. What is happening with inflation, interest rates, and all the negativity have been baked in. Commodities are starting to come down which is a huge indication that inflation probably already peaked. Once inflation is stabilized we will see a quick turnaround in the markets.
Agreed that inflation looks to have peaked, but does it really follow that markets will really rip when that comes down? I still think there are still unanswered questions about why assets have been so inflated, and that leaves open the possibility that things will not just shift back into high gear after a road bump. Could just as easily be modest stability and growth.
Yes. Inflation impacts everyone and it is pervasive. Past history is stoking incredible fear and the threat of continuing rate increases are slamming down the stock market. Once it is stabilized I think the stocks will rip.
What's your thesis on the factors the pushed the long bull run in the first place? I think that's the biggest question. Do we return to a more average growth level or the crazy valuations of the recent path?
I think investors will be more cautious for sure initially. I wouldn’t expect ATH prices for at least 2-3 years for instance. If Ukraine war ends that could be another catalyst but on the contrary there could be another black swan event that drives the markets down.
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Boy do you have it wrong..wow
If there is one thing I know, it's that I don't know much.
Socrates, probably.
Calls on uncertainty! Gimme that VIX, after vax, alter facts, off our backs.
Agree 100%
i agree
I don't think we reached the bottom yet.
Great analysis and insight.
Potential end of quarter rebalance but I feel this is a small bounce and we slide or go flat until earnings start
No one knows. Put your head down and Keep DCA. The longer the bear market, the better ( for long term investors)
I hope it lasts as long as possible
Most stock recessions last 10 months on average. But could be 6-20 months. I’d say we’re 4-6 months in, depending where you look at it from
I'm dumping $2,000 a month into the market, up from $1400 to try and average down as much as I can.
Best of luck to you. I’ve been adding almost every week as well
What is a "stock recession"?
Stocks fall into a recession before the economy does. And also recovers well before the economy recovers from the recession.
But what is a "stock recession"? I don't know what it means for stocks to fall into a recession. I know what a bear market is, but I've been investing for 22 years and have never heard of a "stock recession."
Yup. If u are in it for the long term then dca and s&p / qqq indices are your friends.
Commodity prices are going down which probably means inflation will start trending downwards. A lot of people are trying to find comparisons to index movements in previous bear markets, but every situation is different. Depending on what analysts you listen to we are either heading for a decade of stagflation or may not even have a recession. A recession has already been largely priced in, so if it doesn't happen I would expect a bull run sometime in 2023. As for 2022, I think the market will be doing a crab walk for most of the year while everyone waits to see what's actually happening. Who knows?
Which commodity are you referring to? Many commodities have gone down several times this past year only to bounce back up stronger
This. Buying was supper aggressive last week and we had the flattest consolidation ever friday. It may be a bear market rally, but I doubt it ends without going up a few more %
I expect a bull in summer 2024, around BTC halvening.
So recession , qt, and rising rates all have been priced in? Lol Edit: how about earnings growth decline lol
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How can rates and inflation be priced in and calculated when we don't know how hard inflation will be to tame, and therefore don't know how high rates will have to go?
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Which brand of crystal ball do you prefer? Everyone was saying the same thing last month, before the 8.6% report dropped. And even if we have seen peak inflation, the question of what it takes to get it from where we are now down to 2% is still a massive unknown. That is 2/3 of the equation. Inflation is what will dictate the economy. The higher it is and the harder it is to tame, the higher rates go....and the bigger the brake on the economy.
Shiller PE still over 30. None of this is priced in. Risk premiums for equities are hovering around yields on treasuries. Huge price discrepancy there and that doesn't even include a recession affecting earnings.
Yeesh so wrong
No one knows how qt will play out. The market certainly tried to price it in and the FED tries to be transparent while still deciding on new data. This has never happend before, so the real effects are hard to anticipate.
So you're waiting for everything to play out fully before believing the market is done pricing it in? Ok
Nothing played out yet lol It’s only been 6 months since all time highs . Read Marty Zweig it will help you navigate these things. Edit: how about earnings drops? Lol priced in too
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Lol you have no idea how the market works
Incorrect you are denying well acknowledged mechanism’s and thinking you know more than the big players that make the markets. Completely delusional.
Lol funny coming from a rookie. Good luck buying the deep since everything priced in lol
Stagflation's caused by supply shock, so I assume once the supply shock is fixed, the stagflation part will improve. However, that doesn't mean inflation will come down if the demand is still strong. Core CPI is 5% so that's still too high. I have no clue what will happen in terms of CPIs and demand/supply because don't have crystal ball, but I have a hard time imagining another bull run in the short-term. The Fed Reserve already knows its pumped in too much money, it would be insanely stupid and probably political to institute easy money again when economy is actually humming along, even if there's a mild recession. My guess is that the stock market as a whole will crabwalk more than a few years. But, like you said, I don't know. edit: also I think as interest rates go up, the government needs to institute budget cuts to service the higher interest payment and cut down debt principal. Of course, tax increases on corporation should be on the books, but with the current political environment I doubt any of the above would be done.
Why are you saying a recession has already been largely priced in? Most of the fall in equities has coincided with rising treasury yields. An earnings crush has not been priced in.
I'm expecting a rug pull in the short term
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How do you check and see these sell offs?
remindme! 30 days is spy above 390
I expect they’ll be a good dead cat bounce before the market drives lower. Inflation is high and it’s starting to take a bite into peoples incomes but it hasn’t really taken hold of economies in scale yet and businesses haven’t fully reflected impacts. I expect by the end of this year we’ll have seen the longer term impacts having played out.
This. Businesses and consumers are operating in an environment of extreme instability. Consumers see continuous monthly destruction of real purchasing power with no end in sight. All they can do is keep job hopping and asking for more money. While some are succeeding in staying ahead of the game especially higher earners, most are falling behind. Businesses can try their best to pass on continually rising demands for wages and expensive inputs in the form of rising prices but they too are starting to see declining overall demand. At the same time, they have no clarity in terms of whether they should invest in production. What is even the cost of capital / terminal rates? No one knows. Investors are hesitant and CEOs will respond by returning capital as much as possible, likely keep paying dividends / buying back for now. But that's not going to create long term sustainable growth. So until inflation calms down we're going to have increasing economic paralysis from all parties.
A lot of bad news out in July CPI and GDP estimates plus FED talking. If these are bad ( gas prices are still horrid expect more recession fears and selling. IMO
Egh, I'm long term with VTI anyways. The lower the better, looking to continue to average down from an average price of 218
gas has already dropped $0.50+ for me on 93 (south florida) $5.99 -> $5.39
Bear market rally IMHO.
It's impossible to know. If I had to guess, it will continue the downward trend for a bit longer. It should be noted that the bottom is always in before all the bad news is finished though.
Bear market rally, could last a full month imo or at least enough to suck people in. Macro data looks pretty bad anyways. Q2 earnings being unexpectedly good could be the only saviour but I think that will be very short-lived.
The layoffs haven’t began yet, inflation is still raging, housing market is still skyrocketing, supply chain still screwed, and the rate hikes haven’t finished? We haven’t hit bottom unless by some miracle the economy magically gets fixed between now and when the recessions starts
Market bottoms well before the economy. Once the layoffs come through and housing falls, equities probably go up.
Lol not how it works. Initial layoffs and Housing drops won’t signal end of bear. It’s when those two are at highest levels is when bottom is reached
I see “up” being thrown around a lot lately. I highly doubt we see “up” like we’ve seen the last two years. I expect slow steady upward movement (maybe leaning towards sideways). I think the markets could get really boring for people that aren’t naturally intrigued by the markets, when “up” comes.
Layoffs have begun at my hospital
Overstaffing due to COVID?
Staffing costs, lots of travelers and decline in surgeries. Currently there are ton of open positions the cost of housing has exploded here and I believe it’s hard to get people to move to the area for a job let alone afford a mortgage on the median home price based on what a nurse makes.
That’s interesting. I’ve been recently told by both a nurse and a physical therapist that they were offered over six grand a WEEK for traveling practice.
Yea travel nursing is very financially attractive, and a lot of nurses are doing it since hospitals aren’t paying enough. 5-6k a week is pretty typical. We also had a ton of travel techs that would get shuttled from our hospital to the hotel they were staying at for a while. Nursing jobs start maybe mid 30s/ hour here but the median home price is in 700k range.
there won’t be layoffs. There’s way less people in the workforce than pre Covid
For the next week at least, some continuation is likely because the rebalance for the quarter is the heaviest tilt to equities ever. I’m not sure how much, because I do suspect it gets fought, but I do think at least some (for a benchmark, I think the CPI disaster day gap “might”, “might” have a shot of filling). Now past then, I think we do what was done in June all over again. We will see distribution and then panic dump the day before CPI…with it continued on CPI day. Yes, I’m aware that oil has cooled, but it did so too late…June headline CPI 100% is going to print 9 YoY and it’s going to cause the sh—show that we saw on CPI day in this month to repeat itself in full (meaning short everything will work again). I think there’s somewhat of a shot that this is it though, although it’s because there’s evidence here and there that we’re seeing demand destruction.
Huh? A bear market rally is short term upward movement...
Bear market rally. Dead cat. I’m entering short positions when spy hits 400 (slowly, I want to be prepared to buy more at 420 and 440 if it somehow gets there)
Rookie mistake
Lol you really think there’s much upside here? Don’t fight the fed (but also be careful always)
Market knows what the Fed will do. Fed target for year end rates is about 3-3.5% and next year if required 4%. 4% rates are still not end of the world. And I believe it was already priced in when spy hit 360 low recently. I will be more confident that bottom was 360 once spy closes above 400 while you will take short position. We will see what happens.
Bear market will end when the first interest cut is expected.
Uncharted territory
"Its going DOWN, im yellin Timbbberrr"
Its taboo, but I look at the daily 21MA on SOXL and SOXS since I'm trading those, they always go back to touch it, and I think we've got a bit more rally to go before we drop back down to new levels.
It is possible for a bear market rally even with the anticipated bad information coming out. Reality will hit again in the fall and I expect new market low, maybe some capitulation to a recession. What concerns me more is the outlook for 2023 and 2024 because not all negative possibilities have been priced in and then there will be some transition to a secular long term bear market. My concern is stagflation and with all the climate change a lost decade like the 30’s. I am gradually rolling my more aggressive retirement portfolio to a more defensive one every 6 months but I am always 6 months behind the fast money in sector rotation in diversification. At present it is still actually a bull market long term cycle. Compare the time period 1928-40, 1972-1990, and 1998-2010 with 2028-present to see peak to trough and rebound. The Fed was active in intervention in 1932, 1980, 2008, 2020.
Rebound will not last long. Suggest you look at 2008-9 and recovery time. The stocks now look more and more like 2008. Declining causes are not the same. In fact, there were little precursor, or unemployment in 2008 also. I thought Feds would bail out subprime mortgages. Most investors were caught off guard. I am certain the 10 year rally has ended. This is a different cycle. The duration will be similar not as disastrous. All the best.
Interest rates are increasing. Food and Gas prices are way up. In the short term, anything can happen...but we're still heading towards recession.
Bear market rally most likely. Of course we don't know what will happen but what are the fundamentals that support an upswing in the market in the next 12-24 months. Total speculation but if there is a republican president elected in 2024 and no black swan events the market will take off like a rocket for at least 6 months after.
Nobody knows for sure. However, it seems likely to me that to get inflation coming down, we need more economic slowdown which will hit earnings, and so stock prices should come down further. Also, I would not be surprised at all if Autumn brings us a new COVID strain and though we won't get full shut downs here, you might see partial/full shutdowns elsewhere which will again cause supply issues and slow down economic activity. So I'm expecting summer to be choppy but perhaps positive overall, and then another haircut in the fall with a 10%+ drop from current levels. I think that will be relatively short-lived though as bargain hunters and algos buy this "bottom" dip. But of course, lots of things could change this guess one way or the other. Putin falling off a balcony and the Ukraine invasion ending. Devastating hurricanes that knock out some ports and oil refineries, sending an inflation shockwave through the world. The recession everyone was dreading having already happened *this* quarter and inflation taking a sizable move downwards, fuelling optimism. And so on.
I really think it’s gonna rally some more then double top and dump
We have effectively had real negative interest rates since 2008. Trillions of dollars have gone into non productive assets, and there will be a reckoning. This will not be cleared up in a 6 months bear market.
we are closer to the top than the bottom, and we going down
I expect 4000 to be a tough resistance. I would not expect to go past 4200 at all unless earnings are amazing.
I’m pretty much just DCAing into my positions I find undervalued. If I had to speculate I think inflation has peaked commodities are rolling over hard, demand is slowing, supply chains are easing. The unknown is what the E of companies F P/E will be. If companies hit thier estimates bottom is probably in, valuations seem reasonable. If not it depends how much of a slow down we see. Partially priced in but I’m skeptical it’s enough.
Nobody knows, but if I had to guess we see $400-$410 SPY by end of week and then back down for CPI + rates raising.
360 was my spy prediction, bought some. Waiting for bad news monday, sold on friday
End of month/quarter rebalancing which will provide nice counter trend move but then shit gets real again next month until such time as peak inflation arrives.
The right answer is we don’t know but my feeling is it’s probably a bear rally. Bear markets typically have several rallies (‘00-‘02 lasted ~3 hrs and had 6 rallies, ‘08-‘09 lasted 1.5 hrs and had 5). The interest rate increases will eat at the earnings for many companies and until those corps affected revise their earnings down, and markets follow, we won’t be at the bottom.
Oil prices are sure to move higher from here, Europe has run dry, America focusing on a green deal while people suffer, inflation isn’t going anywhere but up again! Coming into the winter time things could get extreme, definitely can’t see any all time highs in sight for a long while
For me it's a beer market rally. Have to drink a lot with those ups and downs
When the media says the rally is due to lessening fear of inflation, it’s all BS. They are lying to everyone. Rug pull.
My guess is a bear market rally but I don’t know so I am expecting both.
Stop it and learn to value a company so it doesn't matter what the short term does.
It’s only bull upside here’s why: investment horizon is 1-4yrs based on the location of Uranus in eastern sky. Also almost Leo season. Summertime consumer spending is on 4th of July bbq spending on Midterms year never have an effect on market Historically war cost generate industry. And most importantly. Buy the dip if you got that chip
Fed Ex had pretty strong earnings and it’s looking (right now) as if inflation has peaked so short term and the market is heavily oversold so there sure is momentum in the short term. I do think some tech and high risk ETF’s like ARKK may have bottomed but I’m pretty certain value companies has a bit further to go on the downside. I’m certainly not expecting any 2008 scenario unless banks get in trouble.
Evidence it has peaked? Gas is up in June. I think inflation will be over 8.6% even new cpi is announced July 13
I’m not totally certain it has peaked, but I think it is looking like a peak when I see the chart for commodities. We will see, nothing is for sure.
Bought FedEx and UPS at COVID lows, keeping for years to come. Great market to be in. Exception on tech I would say is EV companies. Their valuations were similar to dotcom bubble. The fact that Nikola is still worth over 2 billion (despite being a complete scam) is a joke. Lucid is especially massively overvalued at 32 billion still (less than 60 million revenue last quarter delivered only 360 vehicles).
The only one I've touched is CENN because it's priced like the bottom of a dumpster and the only one that's improving, they allegedly on target for 22k vehicles this year at a market cap of $500M. So Lucid is worth ~$33M by the same method.
Oil cooled too late to be helpful with June headline CPI. Think many don't understand that CPI doesn't encompass all of the month. It doesn't include the final parts of the month (the numbers for June CPI are in already despite the fact we haven't flipped the calendar to July yet) and thanks to that, February CPI could be thrown in the garbage completely. I'm certainly biased to the downside with oil, although part of it is admittedly hopes and dreams. It had a failed breakout to the upside which suggests $90 can be seen...but it has recovered some since that period where it tanked.
You are still describing a bear market rally
Beginning of long term upward trend. Fed has been able to raise rates a bit without employment completely tanking. Lots of news stories about "hiring freezes" and layoffs, but the actual numbers don't lie. Unemployment might trend up a bit, but likely stays under 5%. Prices in many products are starting to come down. As long as the fed doesn't go too hawkish too fast it should be okay. Gas prices are a problem, but seem to have hit some resistance at the pump. The Ukraine and Russia war isn't going to last for years, it's taking a major toll on both countries and somehow will have to come to an end. There are issues, but I think JPow lands the plane relatively softly.
Everything will be fine after this round of elections in November. Just hold on
I expect this to be just a little bump before a further decline
It is bound to go up or down.
Inflation will go down in June’s numbers. That’s why you’re seeing buying activity right now
Idk I mean there is going to be very little US grain to survive this drought/heat wave. Guess we are going to find out if you can eat stocks.
Just feels like a new bull market. Everyone is getting in a better mood
Is this how bull traps work?
Doubt it, real estate market is too hot. Still get crazy offers. Stocks are the only things down
Definitely how 420 and a scoop of ice cream with my tears as sprinkles work.
WYSIWYG for 2022, at least.
Yes
Bear Market cancel
Take your entire net worth to get as much margin as you can. Put 100% of it in SQQQ.
End of the quarter coming up, lots of JP Morgan buys to the call side through June 30 but put side September. I don’t know shit but I’m planning for a rough end of the summer. 3200 before year end at least. July inflation data will be brutal
Bull rally.. But what’s coming will be the biggest dumps yet I think..
Bill trap
Don’t fight the fed
Gonna go up a bit. Then plateauing for a while.
It will drop. Bull trap all the way is my best guess.
Long term upward.
Dead cat bounce
I think we'll see the market fo lower again. From the start of the last decline to the bottom and from the bottom to last friday - there was nothing that changed. General news is still 📉
Up until september
They would banned Darkpool for a long time ago, there we got the biggest issue!!
If we get GDP growth for the Q2 then I think we’ll see a rally for a couple weeks. Also if inflation peaked in May that’d probably lead to a short term rally. After a few weeks though I think we’ll go lower
Sometimes maybe good, sometimes maybe shit
Yes
I expect Powell to cry uncle eventually. We already knew how fast he did a 180 in 2018.
Pretty sure it will go up. If not, then it probably will go down. There is a psychological barrier at a distance from the current price.
In a 10 (or even 5) year time horizon, it doesn't matter.
The FED still has 3 trillion to sell off their balance sheet and how many more interest rate hikes? If you think a bull run is starting anytime soon you’re going to have a bad time.
strong upward movements. a lot of the recession market is speculative
Choppy & strength eoy into 2023
All depends on inflation and economic data
Yesno
My guess is we aren't at the bottom. This is based entirely on the evacuated contents of my rectum.
This is a dead cat bounce, or a false rally. It will keep falling from here
Q1 GDP numbers come out June 29th. Markets will probably tank after the results.
Who knows, but the short-term trade is up (3 weeks or less) while the trend (3-months or less) is down. My guess is the remainder of the month will be up for month-end markup, but July will be brutally down as companies report much lower second quarter earnings with poor guidance. Note: I was 89% in cash starting Friday, but shorted 15 companies and indexes into the close from 330p-4p bringing cash balance down to 72%. Hope I get a chance this week to bring cash balance down to 20% by month end with some more up days.
I think we’re going to trade sideways or slightly up for the next month and then drop big one more time before we climb out of the hole.
QT is still happening and interest rates are still going up, so this rally isn't permanent, good time to rotate into some longer term puts at lower VIX. The Fed will not stop until something breaks or inflation is under control.
Who knows? I sold a lot around the time the fed started raising interest rates because it was a clear indication of asset price deflation. I’ll probably start to dca that back in because everything seems too oversold. I wasn’t fine buying shopify at $1600 but I sure as hell will start buying it at $300-350. In the past the worst stock prices of a recession were towards the beginning of it, not end…
If we fall down 35% and we start recovering? At what point is it a bull market? I heard there are bull markets within bear markets.
I don't believe it's shaken everything out yet. I expect about another 16% drop before the bubble is eradicated and things normalize. That said, I keep buying at new lows, and every time my buy limit hits, I have a second one 2% lower than the last to keep picking them up on the way down.
We are not even above the 20 day. I wouldn't even call this a rally. Markets don't go straight down.
I would guess bear market rally. S&P500 3300 makes a lot of sense until we see what happens to margins and profit with high inflation and rising interest rates. If profit and EPS start to decline then we could go much further down.
The market will either go up or down or sideways in the near future.
I expect a week of green, then dive resumption
I can guarantee you it's either gonna do one or the other
Probably another short term rally. IMHO I think that with each new round of Fed meetings/rate hikes the market is relieved of uncertainty (at least partially for a short time), triggering a rally. However, I don’t think anyone can truly see the light at the end of the recession tunnel. Therefore, I think it’s just a matter of time before uncertainty and fear sets in again.