A few thoughts. Equities more than front ran the adjustment in real rates we're seeing today. Valuations are still rich. And I'm no expert but when the prices of things most SP500 firms sell (goods) are declining while the cost of their main input (wages) is still increasing, I don't get optimistic about margins, growth or EPS.
I'll be alone in this, but I was more curious to the redbook report than CPI today. Now 3% yoy, weak and down from recent 5% readings. Cautious comments out of HD. End of day, more and more consumers are tapped out (even with health insurance supposedly down 30%+ YoY).
It's all about time horizons. If one thinks there are more ppl to join the EOY party, then by all means, Yolo some calls with the rest of the gamblers. Best wishes in getting out in time, once ppl question just how and why inflation is slowing (and where it's not).
I could definitely see things floundering from now until Jan 1, but I'm really doubting this run has the fuel to keep going. You mentioned BTC struggles on Twitter. If you look at total crypto minus BTC and ETH the correlation of peaks in that and QQQ are undeniable. The former looks to have peaked at multi year resistance (i.e. the crypto bros pivoted to short dated options for the last leg of this rally. Exact same happened in July.) If there's something I can foresee spooking markets in Nov, Dec its warnings from retailers and a spike in SA jobless claims as seasonal hiring is forecast to be lowest in 10 years.
People tend to overcomplicate what is a continued, confirmed bullish trend on a very bullish market in the long-term. The fact that we're still at 2021 valuations with the economy this hot, that alone, is quite bullish. I find it counterproductive to get obsessed over the chance the economy "might" eventually slow down. That is always a possibility at any moment in time or point in the business cycle. In order to make money, you trade what you have, not the fear that it will change one day. If you have good risk management, there's no reason to stress out.
Thank you so much for updating your thought processes and positioning! Today's note, like the previous ones, is very helpful. A quick question: do you see U.S. REITs as attractive at least for a short term trade? With the Fed on pause and a lower 10-year yield, do you think today's rally in REITs has legs?
Also if you believe in chart analysis, S&P500 stocks above 200-day is putting in an inverse head & shoulders, along with RSP & the Russell. So maybe breadth will improve & a rally wont be reliant on the MAG7 as has been the case all year.
A few thoughts. Equities more than front ran the adjustment in real rates we're seeing today. Valuations are still rich. And I'm no expert but when the prices of things most SP500 firms sell (goods) are declining while the cost of their main input (wages) is still increasing, I don't get optimistic about margins, growth or EPS.
I'll be alone in this, but I was more curious to the redbook report than CPI today. Now 3% yoy, weak and down from recent 5% readings. Cautious comments out of HD. End of day, more and more consumers are tapped out (even with health insurance supposedly down 30%+ YoY).
It's all about time horizons. If one thinks there are more ppl to join the EOY party, then by all means, Yolo some calls with the rest of the gamblers. Best wishes in getting out in time, once ppl question just how and why inflation is slowing (and where it's not).
Yeah hear you. I think what you describe likely resolves in the New Year. I could of course be wrong
I could definitely see things floundering from now until Jan 1, but I'm really doubting this run has the fuel to keep going. You mentioned BTC struggles on Twitter. If you look at total crypto minus BTC and ETH the correlation of peaks in that and QQQ are undeniable. The former looks to have peaked at multi year resistance (i.e. the crypto bros pivoted to short dated options for the last leg of this rally. Exact same happened in July.) If there's something I can foresee spooking markets in Nov, Dec its warnings from retailers and a spike in SA jobless claims as seasonal hiring is forecast to be lowest in 10 years.
People tend to overcomplicate what is a continued, confirmed bullish trend on a very bullish market in the long-term. The fact that we're still at 2021 valuations with the economy this hot, that alone, is quite bullish. I find it counterproductive to get obsessed over the chance the economy "might" eventually slow down. That is always a possibility at any moment in time or point in the business cycle. In order to make money, you trade what you have, not the fear that it will change one day. If you have good risk management, there's no reason to stress out.
Thank you so much for updating your thought processes and positioning! Today's note, like the previous ones, is very helpful. A quick question: do you see U.S. REITs as attractive at least for a short term trade? With the Fed on pause and a lower 10-year yield, do you think today's rally in REITs has legs?
Also if you believe in chart analysis, S&P500 stocks above 200-day is putting in an inverse head & shoulders, along with RSP & the Russell. So maybe breadth will improve & a rally wont be reliant on the MAG7 as has been the case all year.
Yes exactly, that's my thinking too
Great take, thank you Florian! Appreciate
Thanks. Appreciate your timely post.
And congrats on your long Russell 2000. It’s been a long time since we’ve seen that group up over 5% in one day.
Thank you :)