MARKET: Again the reminder: US stocks: (1) largest net short on S&P in two years (2) largest fund manager cash weight in twenty one years (3) lowest fund manager equity allocation in fourteen years. I reminded of Fear vs Greed rules and that the world had got way too cautious and danger of a violent move to the upside.
The S&P 500 has now rallied over 10% from its intra-day low on June 17th. Legitimate to ask: Was this recent rally a “bear market/flash in the pan”? Well, anyone here subscribe to this?:
Inflation is going to a new all-time which will exceed the previous high in 1917 which was 19.75%. That means a new high in interest rates and a total disaster for bond prices, bond prices will fall 70%. I am guessing few, But I know one!
Absolutely not for me right now, as the market remains oversold and extreme pessimism persists.
Sure earnings coming down and need to. Yes, a Walmart miss, maybe to come a Microsoft miss, or lets hope an AMAZON one, but until a grossly overbought condition is reached, momentum deteriorates, and excessive optimism is witnessed, Greed just might beat Fear!
What seems clear however is that many are holding onto the fact that over the most recent economic cycles, the Fed has always been able to stop hiking well before a recession hit & the period in between has been very good for stocks.
Markets are discounting a similar pattern now, but due to strong & broad inflationary pressures it clearly won't be as easy this time. Avoiding price-takers is clear!
Yes, the latest and most respected surveys show that fund managers have the lowest allocations to stocks since October 2008. I repeat that when this turns, it will be
violent to the upside, ( it is already! )
So many funds are down huge and if they don’t make it back in 2H they are going to be redeemed. You can’t make it back sitting in cash. They’ll be forced to buy what’s
working.
Nutstuff thinks that career survival will force $ into value and energy. A reminder that Nutstuff buys stocks not markets and that’s where my focus remains!
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