2022 Market Sentiment & Positioning

[limster]

US data ** Consumer Confidence and JOLTS Job Openings are pretty good. What recession?!

If consumer confidence is high, that means people will buy more stuff, and inflation will remain high, and Powell will keep raising rates! I guess that's why market is falling.

It is also true, in my view, that the current high inflation in the United States is the product of strong demand and constrained supply, and that the Fed's tools work principally on aggregate demand. None of this diminishes the Federal Reserve's responsibility to carry out our assigned task of achieving price stability. There is clearly a job to do in moderating demand to better align with supply. We are committed to doing that job.

https://www.federalreserve.gov/newsevents/speech/powell20220826a.htm
Companies with less debt will suffer less than companies with high debt. Pick your stocks wisely!

 

[theMKR]

sian, job data is good, but i am getting destroyed at ES00

nowadays, it seems like, good news is bad news and bad news is good news?

 

[revhappy]

This is the strangest bear market I have seen. The daily moves are quite large and markets have come off significantly. Yet I see no major accidents or liquidity events like in the past. It seems very orderly market behaviour, like everyone is expecting it. No major margin calls and big hedge funds going down etc. In fact it is the hedge funds who are shorting the market.

Does anybody else feel the same?

 

[theMKR]

This is the strangest bear market I have seen. The daily moves are quite large and markets have come off significantly. Yet I see no major accidents or liquidity events like in the past. It seems very orderly market behaviour, like everyone is expecting it. No major margin calls and big hedge funds going down etc. In fact it is the hedge funds who are shorting the market.

Does anybody else feel the same?

you think its a short rather than a sell off?

 

[revhappy]

you think its a short rather than a sell off?

Yes, I think so, it is hedge funds front running the actual sell off. The actual sell off hasnt happened. That will happen only when earnings come lower and rates go higher and then TINA is no longer the buzzword. We have a generation of under 40s who have only seen buy the dip work over and over again, so none of the long only investors are selling. But if we have like 5 years of flat to negative markets and people see fixed income returning 4% while stocks return 0 or -ve, people will realize there is a place for fixed income too.

Stocks are for the long term, no doubt. But then long term sometimes means 10 years of no returns. Stocks test the patience of most investors. The last couple of decades have been so easy, they havent been tested.

I could be completely wrong and markets just turn around and keep marching higher. But this is the scenario that I would like to prepare for and remind myself.

 

[theMKR]

Yes, I think so, it is hedge funds front running the actual sell off. The actual sell off hasnt happened. That will happen only when earnings come lower and rates go higher and then TINA is no longer the buzzword. We have a generation of under 40s who have only seen buy the dip work over and over again, so none of the long only investors are selling. But if we have like 5 years of flat to negative markets and people see fixed income returning 4% while stocks return 0 or -ve, people will realize there is a place for fixed income too.

Stocks are for the long term, no doubt. But then long term sometimes means 10 years of no returns. Stocks test the patience of most investors. The last couple of decades have been so easy, they havent been tested.

I could be completely wrong and markets just turn around and keep marching higher. But this is the scenario that I would like to prepare for and remind myself.

actually i have been wondering, whats the point of fixed income all along, the risk is about the same, and yet the returns are "fixed"

 

[revhappy]

actually i have been wondering, whats the point of fixed income all along, the risk is about the same, and yet the returns are "fixed"

We have had crazy monetary policy last couple of decades with lots of money printing, low inflation due to cheap products from China and cheap energy from Russia helped.

But now the regime has shifted. Central Banks will have curb the animal spirits and engineer a recession by design, in order to rein in the demand to match it with the now reduced and more expensive supply.

So the way they will do it is increase the cost of money so people stop borrowing and investing and buying like crazy and actually keep money in fixed income and this time we will get the returns too

Make fixed Income great again, should be the new Moto

 

[limster]

the way the market is gently drifting downwards, I think market is looking at making a 'higher low'. S&P500 may even bottom out at 3,800.

 

[RedsYWNA]

This is the strangest bear market I have seen. The daily moves are quite large and markets have come off significantly. Yet I see no major accidents or liquidity events like in the past. It seems very orderly market behaviour, like everyone is expecting it. No major margin calls and big hedge funds going down etc. In fact it is the hedge funds who are shorting the market.

Does anybody else feel the same?

It looks like an orderly bear market to me. Seems that institutions are selling slowly but surely to retailers and other (long only)/value funds......

 

[revhappy]

the way the market is gently drifting downwards, I think market is looking at making a 'higher low'. S&P500 may even bottom out at 3,800.

Yes, this year, I think markets will bounce back from the oversold levels. But I am thinking more longer term, we may have broken the steady rising markets we experienced in the last decade, especially for US markets. We might just keep chopping around up and down 10-20% but not make substantial gains like in the past. So in 2027 S&P500 could be like 5000. I think the primary driver for this is because we are not going back to the previous low rates low inflation regime. 3-5% fixed income returns could be the norm going forward, so markets will face competition, exactly opposite of TINA.

This is just a scenario that I am painting that next 5 years 60/40 portfolio will beat 100% equities portfolio.

 

[sohguanh]

Yes, this year, I think markets will bounce back from the oversold levels. But I am thinking more longer term, we may have broken the steady rising markets we experienced in the last decade, especially for US markets. We might just keep chopping around up and down 10-20% but not make substantial gains like in the past. So in 2027 S&P500 could be like 5000. I think the primary driver for this is because we are not going back to the previous low rates low inflation regime. 3-5% fixed income returns could be the norm going forward, so markets will face competition, exactly opposite of TINA.

This is just a scenario that I am painting that next 5 years 60/40 portfolio will beat 100% equities portfolio.

If it is like you predict up down 10-20% then better learn to sell and buy back. I started US stock this year so unlucky then

 

[revhappy]

If it is like you predict up down 10-20% then better learn to sell and buy back. I started US stock this year so unlucky then

It is not easy. You need to get both the buy and the sell right. Chances are very small that you get both right. It is much better to just buy a hold a portfolio. Just that I dont expect runaway gains for the medium term.

 

[zzTiny]

I painted a different picture. As I state my views few months ago, I had say that S&P will be a nice value at 3600-3800 by the end of the year provided that earnings remain the same if anyone had still remember.

Depending on the earnings (hopefully nothing breaks), I will like to say that 4300-4400 will be a pretty nice value by the end of next year. As for inflation and fed decision by late 2023, it remains to be seen but I do think its pretty hopeful. I am naively optimistic at times, nothing breaks huh.

Fixed income is not the place to be. It will be a great mistake even If we ever return back to some high level of interest rate (4%+). Hopefully, nothing breaks.

 

[d9_lives]

Just DCA, don't overthink it.

 

[kickass22]

Just DCA, don't overthink it.

That is true. But just DCA without a clear asset allocation is trouble.

 

[edwardZ]

the way the market is gently drifting downwards, I think market is looking at making a 'higher low'. S&P500 may even bottom out at 3,800.

friday's NFP might set the tone for this month. US indices falling to their supposedly "strong" support zone back in June so highly likely might see a decent bounce but how strong the bounce will be the question. If the reversal structure looks good, possible to DCA a small lumpsum here though i would prefer a larger drop to next lower zone for better DCA entries

 

[aurvandil]

This is the strangest bear market I have seen. The daily moves are quite large and markets have come off significantly. Yet I see no major accidents or liquidity events like in the past. It seems very orderly market behaviour, like everyone is expecting it. No major margin calls and big hedge funds going down etc. In fact it is the hedge funds who are shorting the market.

Does anybody else feel the same?

It is likely due to the changed structure of the market. The market is now dominated by derivatives like futures and options. These have become very sophisticated and efficient, allowing for very low cost hedging away of unwanted event risk.

 

[d5dude]

Yes, this year, I think markets will bounce back from the oversold levels. But I am thinking more longer term, we may have broken the steady rising markets we experienced in the last decade, especially for US markets. We might just keep chopping around up and down 10-20% but not make substantial gains like in the past. So in 2027 S&P500 could be like 5000. I think the primary driver for this is because we are not going back to the previous low rates low inflation regime. 3-5% fixed income returns could be the norm going forward, so markets will face competition, exactly opposite of TINA.

This is just a scenario that I am painting that next 5 years 60/40 portfolio will beat 100% equities portfolio.

Low inflation doesnt mean high returns and vice versa, many countries like Japan and SG had very low inflation (reported numbers) in the last 20 years but equity returns have been quite abysmal. The drivers for global equity returns in the last 20 years were primarily globalisation and technology. Globalisation is a massive driver of profitability for global companies because they lower input cost/raise profit margins and open up new markets. Technology is the other driver since it dramatically lowers input cost and improve productivity.

Globalisation has definitely peaked since covid and the Ukraine war, what we have now is deglobalisation so thats a negative. Technology like AI is still a major tailwind and that hasnt gone away. On average I'm going to say that the next 2 decades is going to be worse than the previous 2 in terms of global equity returns, but I'm still optimistic that it will still do better than most other asset classes.

 

[platee]

Whats the link? Sabbath yr over then what?

Sabbath year always ends off with a "bang". It shows you who programs the trading algos on wall st.

 

[ctan84]

Sabbath year always ends off with a "bang". It shows you who programs the trading algos on wall st.

Nonsense lah. 2008 was also the end of the Sabbath yr but market didn't bottom until 1st quarter of 2009.