2023 Market Sentiment & Positioning

[revhappy]

(2) long term - I think fed’s intention is to hold until something breaks. If 1 year, 3 years, 5 years nothing breaks, then I think they will hold rates high and do QT all the way until something breaks (to correct their mistakes). If inflation goes to 2% and nothing breaks, then that is “soft landing”

S&P500 could go back to 4800 as soon as next couple of inflation prints come in lower. Imagine inflation is 3% by end of the year and S&P500 has already gone to 4800 and then FED says, "We have achieved our goal and with inflation at 3% we dont need rates to be at 5%", they do the 1st cut and then markets rocket even higher. All those smartass analysts like Morgan Stanley's Mike Wilson are hoping that bad earnings this year will tank the markets. But markets are forward looking, so they are already looking at 2025 earnings.

If I was even 75% confident that FED will break something then I can be 0% equities. But I am not sure, so I am at 50:50.

 

[weng0202]

S&P500 could go back to 4800 as soon as next couple of inflation prints come in lower. Imagine inflation is 3% by end of the year and S&P500 has already gone to 4800 and then FED says, "We have achieved our goal and with inflation at 3% we dont need rates to be at 5%", they do the 1st cut and then markets rocket even higher. All those smartass analysts like Morgan Stanley's Mike Wilson are hoping that bad earnings this year will tank the markets. But markets are forward looking, so they are already looking at 2025 earnings.

If I was even 75% confident that FED will break something then I can be 0% equities. But I am not sure, so I am at 50:50.

Will inflation drop so fast? Anyway I believe the low has been reached last year so this year should be a better year for stocks.

 

[revhappy]

Will inflation drop so fast? Anyway I believe the low has been reached last year so this year should be a better year for stocks.

There is base effect. Inflation is rise over a period. So we dont need prices to fall, we only need them to not rise faster. That is not very difficult. The effects of rate hikes so far will kick in with a lag.

 

[boroangel]

Personally I wouldn’t want to fight the FED and gut feel is rates will continue to stay high this year, and no rate cuts for 2023. Just my guess.

I am looking at those companies that have never made a single profit in their company history quarter on quarter and keeping my faith (or wishing) that regular short positions on this will reap some rewards this year. With rates remaining high I am curious to see how they will ride out this year and where is the breaking point.

Happy to stay at 80 cash 20 equities for now till mid year and just do some small amount trading.

 

[DevilPlate]

My humble non professional view

(1) short term - anything may happen and only stock of god will know (if there is this person)

(2) long term - I think fed’s intention is to hold until something breaks. If 1 year, 3 years, 5 years nothing breaks, then I think they will hold rates high and do QT all the way until something breaks (to correct their mistakes). If inflation goes to 2% and nothing breaks, then that is “soft landing”

Just my nonsense view (not financial advice). Personally, I will follow this approach strictly

One possible scenario that deflation is coming soon and Fed has a valid reason to unwind QT and start cutting rates.

Previously, I never think of a possible deflation scenario and Fed will only cut rates in the event of a hard landing.

 

[elvintay07]

One possible scenario that deflation is coming soon and Fed has a valid reason to unwind QT and start cutting rates.

Previously, I never think of a possible deflation scenario and Fed will only cut rates in the event of a hard landing.

Great insights. Actually this is what Elon and Cathie are saying but I don’t think so la. Deflation with all the incumbent energy players. I think energy must come down dramatically first. Renewable energy is a total failure as of now. Saudi and the Arab giants are king.

 

[DevilPlate]

S&P500 could go back to 4800 as soon as next couple of inflation prints come in lower. Imagine inflation is 3% by end of the year and S&P500 has already gone to 4800 and then FED says, "We have achieved our goal and with inflation at 3% we dont need rates to be at 5%", they do the 1st cut and then markets rocket even higher. All those smartass analysts like Morgan Stanley's Mike Wilson are hoping that bad earnings this year will tank the markets. But markets are forward looking, so they are already looking at 2025 earnings.

If I was even 75% confident that FED will break something then I can be 0% equities. But I am not sure, so I am at 50:50.

My personal view Fed will only pause rates and not cut rates when inflation drop to 3% coupled with a strong economy and bullish stock market simply because they fear of a possible 2nd wave of inflation if they cut rates. (Fed are aware of the 70s hyperinflation)

4-5% interest rate is actually quite normal in the past prior to 2008 GFC.
Ultra low interest rate is actually abnormal since 2008 haha

 

[elvintay07]

S&P500 could go back to 4800 as soon as next couple of inflation prints come in lower. Imagine inflation is 3% by end of the year and S&P500 has already gone to 4800 and then FED says, "We have achieved our goal and with inflation at 3% we dont need rates to be at 5%", they do the 1st cut and then markets rocket even higher. All those smartass analysts like Morgan Stanley's Mike Wilson are hoping that bad earnings this year will tank the markets. But markets are forward looking, so they are already looking at 2025 earnings.

If I was even 75% confident that FED will break something then I can be 0% equities. But I am not sure, so I am at 50:50.

I want to believe that narration also but quite unlikely. I believe

(1) inflation has peaked
(2) inflation except oil will drop dramatically with China opening.
(3) I believe your narration of inflation may become 3% (not difficult) because you just need price to go up slowly not come down

I quite sure something will break but it doesn’t warrant a 0% allocation. My spouse strategy is to go DCA. Market bearish she whack more, market bullish whack less. So far very powerful. My losses compared to her’s is like primary school boy vs full professor. And she didn’t really need to open her app at all.

 

[DevilPlate]

Great insights. Actually this is what Elon and Cathie are saying but I don’t think so la. Deflation with all the incumbent energy players. I think energy must come down dramatically first. Renewable energy is a total failure as of now. Saudi and the Arab giants are king.

short term 1 to 2 qtr of deflation is possible this year though. Crude oil has been falling and natural gas as well.

Also, I mentioned about US has changed CPI calculation method that will potentially bring down the figure more.

 

[stanlawj]

Personally I wouldn’t want to fight the FED and gut feel is rates will continue to stay high this year, and no rate cuts for 2023. Just my guess.

I am looking at those companies that have never made a single profit in their company history quarter on quarter and keeping my faith (or wishing) that regular short positions on this will reap some rewards this year. With rates remaining high I am curious to see how they will ride out this year and where is the breaking point.

Happy to stay at 80 cash 20 equities for now till mid year and just do some small amount trading.

Similar viewpoint. keeping high cash allocation, strategic long/shorts when I see the opportunity.

Doesn't matter if SP500 continues to make new high. There are always stock laggards in the market that correlate with SP500 which I can target easily to go in and out since I'm small guy, not a billion-dollar behemoth. Portfolio managers can't stay 100% cash and then underperform SP500 quarterly, so they are the ones who feel the heat.

 

[revhappy]

I quite sure something will break but it doesn’t warrant a 0% allocation. My spouse strategy is to go DCA. Market bearish she whack more, market bullish whack less. So far very powerful. My losses compared to her’s is like primary school boy vs full professor. And she didn’t really need to open her app at all.

I am also doing automatic DCA of 6k each month. So my allocation should rise slowly towards 55-60% by the end of this year.

 

[DevilPlate]

Similar viewpoint. keeping high cash allocation, strategic long/shorts when I see the opportunity.

Doesn't matter if SP500 continues to make new high. There are always stock laggards in the market that correlate with SP500 which I can target easily to go in and out since I'm small guy, not a billion-dollar behemoth. Portfolio managers can't stay 100% cash and then underperform SP500 quarterly, so they are the ones who feel the heat.

Yeah peanut retail investors like us can even go 100% cash since cash is no longer trash atm as long we do not have high market return expectation.

I always remind myself losing to inflation is better than losing much more in the stock market. LOL

 

[DevilPlate]

I am also doing automatic DCA of 6k each month. So my allocation should rise slowly towards 55-60% by the end of this year.

In my early days of investing, DCA isn't popular and i am too old to DCA now anyway since I do not have a long runway anymore. haha

DCA becomes increasingly popular ever since QE started in 2009 till today.

I only "DCA" into properties (actually tenant help me to DCA) hehe

 

[revhappy]

In my early days of investing, DCA isn't popular and i am too old to DCA now anyway since I do not have a long runway anymore. haha

DCA becomes increasingly popular ever since QE started in 2009 till today.

I only DCA into properties (actually tenant help me to DCA) hehe

You dont need long runway to DCA. I am also 43 now. But my fixed income portfolio is already quite massive at 50% allocation. So any new savings I make, I can directly route it into equities. It is like any new savings I am making now, I treat it like a bonus. In my mind I am FI already.

 

[DevilPlate]

You dont need long runway to DCA. I am also 43 now. But my fixed income portfolio is already quite massive at 50% allocation. So any new savings I make, I can directly route it into equities. It is like any new savings I am making now, I treat it like a bonus. In my mind I am FI already.

I believe we need at least another 20years of runway in order for DCA to work and that means u are expected to continue working and earning an active income for at least another 20 years or so.

I am already semi retired lol (more into wealth preservation)

 

[revhappy]

I believe we need at least another 20years of runway in order for DCA to work and that means u are expected to continue working and earning an active income for at least another 20 years or so.

I am already semi retired lol (more into wealth preservation)

Oh Semi Retired, then it makes sense. Well done! How old are you? Maybe we can take this discussion to the FIRE thread.

 

[DevilPlate]

Oh Semi Retired, then it makes sense. Well done! How old are you? Maybe we can take this discussion to the FIRE thread.

nothing much to share. Just buy properties and hold for 10-30 years (It doesn't really work in today's environment and ABSD)

 

[elvintay07]

Timing the market doesn’t work one la. Unless you are the top 5%, then forget it. Professional fund managers with all their software and algorithms also have problem. Retail investors like us don’t stand a chance.
Of course many would claim they can. If you have the ability, then good.

 

[revhappy]

Timing the market doesn’t work one la. Unless you are the top 5%, then forget it. Professional fund managers with all their software and algorithms also have problem. Retail investors like us don’t stand a chance.
Of course many would claim they can. If you have the ability, then good.

I dont have the ability + even when I am sometime right, I dont have enough conviction to hold winning positions. i.e. I hold on to losers for too long and sell winners early. Just the worst possible psychology to become a trader.

 

[DevilPlate]

Timing the market doesn’t work one la. Unless you are the top 5%, then forget it. Professional fund managers with all their software and algorithms also have problem. Retail investors like us don’t stand a chance.
Of course many would claim they can. If you have the ability, then good.

As long you have the patience and don't fall into FOMO. Only buy when there is a meaningful correction.

However DCA is the best way to accumulate wealth by forced savings and let the market compound for u.
Moving forward, there is actually no other ways to build wealth anymore for the younger gen. (on top of 8k SA yearly top up)

For real estate, a couple can only sell HDB upon MOP and buy 1 condo each and that's it.