In the beginning of the year you predicted a big downturn on SP500 in the fall..So if we are going to have a rally, from what level to what level do you see this happening and when?
That was a great analysis of the VIX you recently made which I benefited from nicely. A big thank you to GOT. However, it seems GOT still keeps their bullish outlook on the market. What events, analysis, macroeconomic data, etc. would make GOT take a bearish stance? I have been with you for the past 2 years and as we all know the market has performed nicely until recently. Just wanted to ask what you are looking for in order to become bearish on the market and do you plan to suggest potential trades to the downside when it happens? Thanks.
Our thesis is based on disinflation and we believe that oil prices have the largest impact on inflation. We are monitoring this carefully. Long term investors should be positioned on the long side, however for tactical short term trades you could pose your questions to the Trading Room.
Inflation peaking? Check. Bond yields declining? Check. Oil prices coming down? Check. Stocks rallying? Oops. While we want inflation and yields to move in the right direction, they also have to move there for the right reasons. A slowing economy, a possibility of recession, and soon to be lower corporate earnings projections and increasing unemployment are not the stuff rallies are made of.
Hello GGB58. We try to stay data dependent and many possible outcomes have not materialized yet. The potential events you mentioned definitely do sound bullish. FED pivots are historically bullish events that rapidly change conditions. The Bullwhip Effect could help reduce inflation. It would make certain people very happy. However we still believe that oil prices have the largest impact on inflation.
Well something has to give. The FED members are saying they are going to raise the FED funds rate to 3 to 3.5% by year end. However the Atlanta Fed is now projecting negative GDP for the 2nd quarter — this can change — likely putting us into a recession. The 2 year yield has fallen to about 2.8%, so the bond market is saying they don\’t believe the FED. Either the FED is going to pivot, or the bond market will need to pivot. Something has to give because I doubt we will have a 2 year yield below the FED funds rate.
In the beginning of the year you predicted a big downturn on SP500 in the fall..So if we are going to have a rally, from what level to what level do you see this happening and when?
Hello David. We will provide a Tactical Update next week.
That was a great analysis of the VIX you recently made which I benefited from nicely. A big thank you to GOT. However, it seems GOT still keeps their bullish outlook on the market. What events, analysis, macroeconomic data, etc. would make GOT take a bearish stance? I have been with you for the past 2 years and as we all know the market has performed nicely until recently. Just wanted to ask what you are looking for in order to become bearish on the market and do you plan to suggest potential trades to the downside when it happens? Thanks.
Our thesis is based on disinflation and we believe that oil prices have the largest impact on inflation. We are monitoring this carefully. Long term investors should be positioned on the long side, however for tactical short term trades you could pose your questions to the Trading Room.
Inflation peaking? Check. Bond yields declining? Check. Oil prices coming down? Check. Stocks rallying? Oops. While we want inflation and yields to move in the right direction, they also have to move there for the right reasons. A slowing economy, a possibility of recession, and soon to be lower corporate earnings projections and increasing unemployment are not the stuff rallies are made of.
Hello The Oracle. Great name! We will be writing a Tactical Update and posting it next week. We think you’ll like it.
My best guess is only if we see the FED reverse actions. Bullwhip effect?
Hello GGB58. We try to stay data dependent and many possible outcomes have not materialized yet. The potential events you mentioned definitely do sound bullish. FED pivots are historically bullish events that rapidly change conditions. The Bullwhip Effect could help reduce inflation. It would make certain people very happy. However we still believe that oil prices have the largest impact on inflation.
Well something has to give. The FED members are saying they are going to raise the FED funds rate to 3 to 3.5% by year end. However the Atlanta Fed is now projecting negative GDP for the 2nd quarter — this can change — likely putting us into a recession. The 2 year yield has fallen to about 2.8%, so the bond market is saying they don\’t believe the FED. Either the FED is going to pivot, or the bond market will need to pivot. Something has to give because I doubt we will have a 2 year yield below the FED funds rate.
It does look like there is rotation into consumer cyclicals. Could be rebalancing.