A lot of people on the internet calling for this current correction as the beginning of the bear market. What are the odds that the current correction is in fact the big crash mentioned in this video?
Its hard to tell, I dont think so, because before every other crash in history, there was some monetary tightening beforehand… this time the market throws a tantrum, before the tightening happens, once it does, there is still some time left for it to work, which means higher inflation and higher stock markets because there is no alternative. I think however with rising inflation and probably worse earnings than in 2021, Gold is more attractive than stocks.
I‘ve been buying with both hands. If Peter is right however, my relatively small Bitcoin position will outperform any gains I missed out on with stocks.
You may be right. No one can tell the future; however, I also don’t think this is the crash. Yes, gold and silver have made nice gains over the past 3 days but I don’t think they will continue. At least not for long. A significant rise in precious metals would signal an abandonment of the USD and that will not happen yet. The Biden administration/FED has much more spending in plan IMO. The fed released its’ report today on the digital dollar. That is the beginning of the end of the USD but until the digital dollar is implemented the dollar and bond yield will be manipulated to control the market (IMO). Follow the bond market and watch the dollar. They will in tandem signal a market crash….once again IMO.
According to Peter (see the previous videos focusing on sp500) this is a correction based on the statement that the fed will raise rates and speed up QE tapering. He says this correction has a good likelihood of breaking channel support and hitting 200SMA and other support around 4400 because the market breadth is low. He expects a blow off top (after this correction) before the big drawdown. There is usually a period of a small correction after the fed announces rate hikes (what we are experiencing now), and the big drawdowns don’t happen until after the FED has already raised rates. Also, there is not a yield curve inversion yet. I think he is correct.
I am gonna go out on a limb here and says the FED will change their view on rate hikes given market conditions, unemployment numbers, and inflation. They may come out and publicly say they will reduce their rate hikes until the 3rd quarter of 2022 and reduce them to 2 instead of 4. This will make the market orgasmic. I don’t see any recovery from this correction other than a change in posture from the FED on rate hikes/asset purchases.
Low odds @angoya. This is a technical correction fueled by weak market internals and the recent Fed tightening announcement, this has been our base case since the SP500 all-time high in Dec 2021.
We’ve not seen any of the big warning signs that are typically seen before larger market drawdowns (or bear markets) such as widening spreads, leading economic indicators rolling over, short-term yields topping out, yield curve inverting and market liquidity drying up.
That’s a good question. During a hypothetical violent bear market in equities, Bitcoin will see the same volatility.
However, the difference is that equities will likely take decades to recover to their all-time high (low forward expected returns like we have now often signal 20-30 years of low returns on equities when adjusted for inflation) while Bitcoin will still have mass adoption blowing wind in its back and likely recover reasonably quickly in a high inflation macro environment. (ie: although both will likely suffer great drawdowns in the next risk-off market environment, Bitcoin will be better suited for another powerful bull run which makes it much more attractive to just “HODL” than equities that have significant long-term risk at current levels).
Peter, how does this correlate to the bullish outlook on equities and Bitcoin in a short term that you have presented – as the last run before the decline? Thank you.
@GOT
Peter, why so pessimistic for medium term? Where else is the money going to go if not into the stock market? Keep it in the bank and guarantee to lose 12% for inflation.
@Jarus Not so pessimistic medium term, I think the first half of 2022 will likely yield great returns, and it’s still too soon to say for the second half.
@Jarus, for additional perspective, have a read through Jeremy Grantham’s GMO report from yesterday: “Let the Wild Rumpus Begin.” As Peter was saying, the S&P can be faced with a long, hard recovery. Also, bear in mind that if there is a crash, liquidity will be constrained – so, not so much cash that needs to be allocated. In this environment, I believe the money will go to a) cheap assets where there is growth (e.g. emerging markets) and b) growth assets that depressed in value but which have long term secular trends at their back (e.g. as Peter explains: crypto’s).
Hi @GOT, we are starting to see some macro data that seems to suggest the inflation is more transitory in nature than first predicted. If that is the case, does that change your thesis, or does it merely extend the blow off top?
WHAT? What data are you talking about? More transitory? By the FEDs’ own admission they got it wrong and the inflation is not transitory. But we all new it from the start if you look at what the FED is doing. The US Treasury issuing bonds that are bought up by banks, then sold to the FED, then waiting to be monetized through government spending. All the while the FED saying it is buying bonds to stimulate the economy at the pretense they are creating money velocity. It is a cyclical cycle which the economy is not benefiting from. Think of it…..Treasury issues bonds, banks buy them, sell them to FED…get put on balance sheet and STAYS there. Yes it shows money moved (money velocity) but was it into the economy???? I don’t think so. It was into the US debt which is owed by WHO? You and ME!!!!!!!!!!! Great inflationary scheme.
@ HY, today’s WSJ shows FDI and how greenfield investments in the US are very weak (5,000 projects last year compared to 8,000 in 2019!). This means that the re-shoring trend, and general investment in US manufacturing capacity is muted in the near-medium term. This means more supply chain issues/shortages, which will continue to effect prices (noting that the biggest impact on inflation is the money supply, which is still growing robustly).
Great video team. I would love to see a follow up video to this one showing which parts of the market you think will be effected the most. i.e. Technology, Finance etc. I am personally only holding Goog stock and waiting for the resumption before coming out completely.
KRBN has been keeping me happy! (Great call out from last year)
If you like $KRBN, I also own $GRN and am seriously considering adding $OFSTF but I don’t want to load up too much on any one sector, so I’d probably have to sell some of my $KRBN and $GRN.
GOT I don’t agree with you that the FED is actually NOW willing to deal with inflation or quantitative easing. It was there plan all along to inflate. Do you believe in the Great Financial Reset? OR Digital Dollar? I see these only 2 options as a collapse in the dollar/financial markets. I’m not a conspiracy theorist but am aware of what is going on. The future is not the dollar IMO.
The FED has been on a decades-long march to the grave. This slow train wreck has gathered momentum since COVID. Last year, was the worth inflation policy “mistake” in FED history. They (including Yellen) got it VERY wrong. Now, as Peter argues (and I agree), the FED is in a pickle. They are going to fight inflation that they let out of the bag. After all, it’s their mandate to do so. However, if they raise rates too much, they will cause a Recession/Depression. If they don’t raise rates, inflation will continue to rear its ugly head, further exacerbating populism (how about that new domestic terrorism unit – lovely!). Anyway, we are in a pickle. It was always going to be bad. Hold on, keep your eyes open, and try not to make emotional decisions!
100% with you Peter, I think a market accident or inflation expectations Vs the fed will cause the reversal… until then we should be range bound or slightly ticking higher
Hi Peter, trying to integrate the content you mentioned in multiple videos.
In one of your earlier YouTube videos, you mentioned that 1) as the S&P 500 falls to near the 200-day moving average and the 10-year bull market price channel in logarithmic scale; and 2) as the percentage of S&P 500 stocks above the 200-day average makes a new low, you would consider this as a good buying opportunity. Both have already happened on Friday. Besides, the put call ratio is also extremely high, signaling a bounce should be imminent.
In an even earlier YouTube video, however, you warned that 2021 Q4 earnings of tech companies is likely to be poorer than expected, exerting downward pressure on stocks. The thing is, large tech companies like Apple, Microsoft, … won’t have their earnings released until the end of next week. Do you think earning reports would cause even more downside, perhaps after a countertrend rally next week ? Or do you think we already see capitulation, and the earnings can’t do much harm ?
@ GOT. Awesome stuff. As a successful professional investor of 20 years, I am picky as to whom I listen and what research I read. You stand out. Your longer-term, technical-fundamental style is rare, and your YouTube research and communications are great. I really appreciate your content – keep up the good work! While I understand that you are not short-term oriented, it would be nice to have more closure on trades. For example, today we blew through the 200DMA on the S&P ($4,397), a point at which you said a few videos ago that you would buy to capitalize on the good risk-reward at that point. Given that you have regularly and recently repeated that you feel that the biggest blow off top is yet to come, I feel that you should be more clear about the trade. In other words, if it has blown through support, do you have a new purchase target? Or, if the risk-reward is appropriate given today’s information, and your expected hold is 6 months, are moving forward with a buy recommendation? Thanks again for your good work.
@GOT – once the bear market comes, will you be offering short trade ideas & positions throughout?
If opportunities present themselves, absolutely.
A lot of people on the internet calling for this current correction as the beginning of the bear market. What are the odds that the current correction is in fact the big crash mentioned in this video?
Its hard to tell, I dont think so, because before every other crash in history, there was some monetary tightening beforehand… this time the market throws a tantrum, before the tightening happens, once it does, there is still some time left for it to work, which means higher inflation and higher stock markets because there is no alternative. I think however with rising inflation and probably worse earnings than in 2021, Gold is more attractive than stocks.
I‘ve been buying with both hands. If Peter is right however, my relatively small Bitcoin position will outperform any gains I missed out on with stocks.
You may be right. No one can tell the future; however, I also don’t think this is the crash. Yes, gold and silver have made nice gains over the past 3 days but I don’t think they will continue. At least not for long. A significant rise in precious metals would signal an abandonment of the USD and that will not happen yet. The Biden administration/FED has much more spending in plan IMO. The fed released its’ report today on the digital dollar. That is the beginning of the end of the USD but until the digital dollar is implemented the dollar and bond yield will be manipulated to control the market (IMO). Follow the bond market and watch the dollar. They will in tandem signal a market crash….once again IMO.
According to Peter (see the previous videos focusing on sp500) this is a correction based on the statement that the fed will raise rates and speed up QE tapering. He says this correction has a good likelihood of breaking channel support and hitting 200SMA and other support around 4400 because the market breadth is low. He expects a blow off top (after this correction) before the big drawdown. There is usually a period of a small correction after the fed announces rate hikes (what we are experiencing now), and the big drawdowns don’t happen until after the FED has already raised rates. Also, there is not a yield curve inversion yet. I think he is correct.
It will be sell the news and buy the actual event (FEDs raising rates).
I am gonna go out on a limb here and says the FED will change their view on rate hikes given market conditions, unemployment numbers, and inflation. They may come out and publicly say they will reduce their rate hikes until the 3rd quarter of 2022 and reduce them to 2 instead of 4. This will make the market orgasmic. I don’t see any recovery from this correction other than a change in posture from the FED on rate hikes/asset purchases.
When the bear market finally comes, nobody will be calling it… not even GOT 😉
Low odds @angoya. This is a technical correction fueled by weak market internals and the recent Fed tightening announcement, this has been our base case since the SP500 all-time high in Dec 2021.
We’ve not seen any of the big warning signs that are typically seen before larger market drawdowns (or bear markets) such as widening spreads, leading economic indicators rolling over, short-term yields topping out, yield curve inverting and market liquidity drying up.
@GOT @Justin Froula
One of more of Peter’s S&P chart.. hit the play button and see where it bounced 🙂
https://www.tradingview.com/chart/US500/GbZqIu7J-SP500/
quite likely I think.
Which asset classes tend to perform the worst in this environment
Risk-on. Equities and crypto will have a hard time.
Hi Peter,
What I’m not understanding is the combination of a positive Bitcoin’s outlook with what you’re saying here.
That’s a good question. During a hypothetical violent bear market in equities, Bitcoin will see the same volatility.
However, the difference is that equities will likely take decades to recover to their all-time high (low forward expected returns like we have now often signal 20-30 years of low returns on equities when adjusted for inflation) while Bitcoin will still have mass adoption blowing wind in its back and likely recover reasonably quickly in a high inflation macro environment. (ie: although both will likely suffer great drawdowns in the next risk-off market environment, Bitcoin will be better suited for another powerful bull run which makes it much more attractive to just “HODL” than equities that have significant long-term risk at current levels).
@Giacomo Bulfone
Can it be assumed that margin balances are mostly towards the long side. Seems like the leverage could be downside hedges as well right?
My query as well @GOT, clarification will be greatly appreciated.
Peter, how does this correlate to the bullish outlook on equities and Bitcoin in a short term that you have presented – as the last run before the decline? Thank you.
@Vener Mustafin See my answer to Giacomo above!
@GOT
Peter, why so pessimistic for medium term? Where else is the money going to go if not into the stock market? Keep it in the bank and guarantee to lose 12% for inflation.
@Jarus Not so pessimistic medium term, I think the first half of 2022 will likely yield great returns, and it’s still too soon to say for the second half.
@Jarus, for additional perspective, have a read through Jeremy Grantham’s GMO report from yesterday: “Let the Wild Rumpus Begin.” As Peter was saying, the S&P can be faced with a long, hard recovery. Also, bear in mind that if there is a crash, liquidity will be constrained – so, not so much cash that needs to be allocated. In this environment, I believe the money will go to a) cheap assets where there is growth (e.g. emerging markets) and b) growth assets that depressed in value but which have long term secular trends at their back (e.g. as Peter explains: crypto’s).
Exceptional presentation guys, quality information as always, thank you.
Thank you!!
Hi @GOT, we are starting to see some macro data that seems to suggest the inflation is more transitory in nature than first predicted. If that is the case, does that change your thesis, or does it merely extend the blow off top?
WHAT? What data are you talking about? More transitory? By the FEDs’ own admission they got it wrong and the inflation is not transitory. But we all new it from the start if you look at what the FED is doing. The US Treasury issuing bonds that are bought up by banks, then sold to the FED, then waiting to be monetized through government spending. All the while the FED saying it is buying bonds to stimulate the economy at the pretense they are creating money velocity. It is a cyclical cycle which the economy is not benefiting from. Think of it…..Treasury issues bonds, banks buy them, sell them to FED…get put on balance sheet and STAYS there. Yes it shows money moved (money velocity) but was it into the economy???? I don’t think so. It was into the US debt which is owed by WHO? You and ME!!!!!!!!!!! Great inflationary scheme.
@ HY, today’s WSJ shows FDI and how greenfield investments in the US are very weak (5,000 projects last year compared to 8,000 in 2019!). This means that the re-shoring trend, and general investment in US manufacturing capacity is muted in the near-medium term. This means more supply chain issues/shortages, which will continue to effect prices (noting that the biggest impact on inflation is the money supply, which is still growing robustly).
Great video team. I would love to see a follow up video to this one showing which parts of the market you think will be effected the most. i.e. Technology, Finance etc. I am personally only holding Goog stock and waiting for the resumption before coming out completely.
KRBN has been keeping me happy! (Great call out from last year)
If you like $KRBN, I also own $GRN and am seriously considering adding $OFSTF but I don’t want to load up too much on any one sector, so I’d probably have to sell some of my $KRBN and $GRN.
GOT I don’t agree with you that the FED is actually NOW willing to deal with inflation or quantitative easing. It was there plan all along to inflate. Do you believe in the Great Financial Reset? OR Digital Dollar? I see these only 2 options as a collapse in the dollar/financial markets. I’m not a conspiracy theorist but am aware of what is going on. The future is not the dollar IMO.
The FED has been on a decades-long march to the grave. This slow train wreck has gathered momentum since COVID. Last year, was the worth inflation policy “mistake” in FED history. They (including Yellen) got it VERY wrong. Now, as Peter argues (and I agree), the FED is in a pickle. They are going to fight inflation that they let out of the bag. After all, it’s their mandate to do so. However, if they raise rates too much, they will cause a Recession/Depression. If they don’t raise rates, inflation will continue to rear its ugly head, further exacerbating populism (how about that new domestic terrorism unit – lovely!). Anyway, we are in a pickle. It was always going to be bad. Hold on, keep your eyes open, and try not to make emotional decisions!
@GOT
FANMAGs are taking a beating, especially AMZN which has underperformed massively in 2021 and 22. I have some positions in these stocks….Time to sell??
Thanks for your help.
100% with you Peter, I think a market accident or inflation expectations Vs the fed will cause the reversal… until then we should be range bound or slightly ticking higher
@ GOT
Hi Peter, trying to integrate the content you mentioned in multiple videos.
In one of your earlier YouTube videos, you mentioned that 1) as the S&P 500 falls to near the 200-day moving average and the 10-year bull market price channel in logarithmic scale; and 2) as the percentage of S&P 500 stocks above the 200-day average makes a new low, you would consider this as a good buying opportunity. Both have already happened on Friday. Besides, the put call ratio is also extremely high, signaling a bounce should be imminent.
In an even earlier YouTube video, however, you warned that 2021 Q4 earnings of tech companies is likely to be poorer than expected, exerting downward pressure on stocks. The thing is, large tech companies like Apple, Microsoft, … won’t have their earnings released until the end of next week. Do you think earning reports would cause even more downside, perhaps after a countertrend rally next week ? Or do you think we already see capitulation, and the earnings can’t do much harm ?
@ GOT. Awesome stuff. As a successful professional investor of 20 years, I am picky as to whom I listen and what research I read. You stand out. Your longer-term, technical-fundamental style is rare, and your YouTube research and communications are great. I really appreciate your content – keep up the good work! While I understand that you are not short-term oriented, it would be nice to have more closure on trades. For example, today we blew through the 200DMA on the S&P ($4,397), a point at which you said a few videos ago that you would buy to capitalize on the good risk-reward at that point. Given that you have regularly and recently repeated that you feel that the biggest blow off top is yet to come, I feel that you should be more clear about the trade. In other words, if it has blown through support, do you have a new purchase target? Or, if the risk-reward is appropriate given today’s information, and your expected hold is 6 months, are moving forward with a buy recommendation? Thanks again for your good work.