2023 Market Sentiment & Positioning

[Hello_Kitty]

Let's hope 2023 will be a better year!!!

 

[revhappy]

2023 my plan is to just maintain my equity allocation around current levels of ~58%. I have moved entirely to global allocation, no more bets on regions or countries. I will spend a lot of time with fixed income in 2023. So many high yielding accounts and ability to lock in good rates.

So 2023 will be mostly balanced allocation and focus on fixed income theme for me.

All the best everyone!

 

[aurvandil]

2023 will be the year when something breaks because interest rates went from 0 bps to 450 bps in 1 year. Sovereign debt crisis and Asian Financial Crisis style currency runs are on the radar. This is especially if inflation remains sticky and US interest rates have to continue to rise. FED is working with ECB to ensure that Europe is ok given the war in Ukraine. No one is looking after the rest of the world.

 

[revhappy]

2023 will be the year when something breaks because interest rates when from 0 bps to 450 bps in 1 year. Sovereign debt crisis and Asian Financial Crisis style currency runs are on the radar. This is especially if inflation remains sticky and interest rates have to continue to rise. FED is working with ECB to ensure that Europe is ok given the war in Ukraine. No one is looking after the rest of the world.

This seems a bit non consensus. Most EMs are not leveraged and DXY has actually started falling.

 

[aurvandil]

This seems a bit non consensus. Most EMs are not leveraged and DXY has actually started falling.

The level of offshore US$ denominated debt is 4 to 5 times that of domestic US$ denominated debt. The Euro dollar market on which it is transacted is designed to hide most of it from US oversight. No one really knows who borrowed all those US$. All we know is that a lot was borrowed at near 0 bps and now it all has to be refinanced at 450 bps.

Like GFC 1.0, the crisis will come from hidden pockets of malinvestment. The crisis will also take some time to develop as borrowers burn through their reserves and reach the point where they can no longer pay.

 

[DevilPlate]

There are some talks about deglobalisation + unwind of decade long QE = secular high inflation

Perhaps, 4-5% inflation will be the new norm.

FED may adjust their 2% target to 3-4% LOL

 

[RedsYWNA]

There are some talks about deglobalisation + unwind of decade long QE = secular high inflation

Perhaps, 4-5% inflation will be the new norm.

FED may adjust their 2% target to 3-4% LOL

Just like 'Swiss std of living' has been quietly dropped, Fed will quietly drop the 2% inflation target, and 3-5% inflation will be the new norm.......

 

[revhappy]

I don't think it is so easy to predict inflation. On a broad basis inflation is high when the rate of change of cash savings with people is much higher than the goods and services produced.

During pandemic, there was crazy helicopter money printed and given to people without them having to produce any goods and services.

But this was a one off and eventually this stock of excess savings is getting spent and borrowing has become extremely expensive now. So it is unlikely that year on year inflation keeps rising by 3-4%.

My view is we are now on the other side of inflation mountain and we could see deflation.

People are now basing their inflation thesis on employment statistics, many people have left the labour force and are not coming back and now you need to pay workers higher wages for the same job. It needs to be seen how long will it take for unemployment to start rising.

 

[elvintay07]

I think

(1) US with so much debt will eventually have to lower rates. I don’t think it can sustain for long.
(2) the Russia-Ukraine war will eventually end. How long can you fight a war? Let’s put 5 years as a target.

 

[DevilPlate]

I think

(1) US with so much debt will eventually have to lower rates. I don’t think it can sustain for long.
(2) the Russia-Ukraine war will eventually end. How long can you fight a war? Let’s put 5 years as a target.

WS is pricing in FED pivoting by mid 2023.

If elevated interest rate stay through till 2024/5, something big might just crack lol

Personally do not think SPY & global index etf are cheap at current level.
Only China tech and growth stocks are cheap but cheap for a reason lol.

 

[revhappy]

What do you guys think about the CPI report today? It seems markets are gearing up for lower than expected number and want to rally.

I have a feeling there are more chances of disappointment, and upside surprise in the release given how everyone is expecting downside surprise.

 

[elvintay07]

WS is pricing in FED pivoting by mid 2023.

If elevated interest rate stay through till 2024/5, something big might just crack lol

Personally do not think SPY & global index etf are cheap at current level.
Only China tech and growth stocks are cheap but cheap for a reason lol.

I think pivot only if things are broken.

 

[elvintay07]

What do you guys think about the CPI report today? It seems markets are gearing up for lower than expected number and want to rally.

I have a feeling there are more chances of disappointment, and upside surprise in the release given how everyone is expecting downside surprise.

CPI should be good and market will move up. But I foresee real economy to suffer and eventually recession down due to weaker earnings and unemployment up

 

[revhappy]

Inspite of the amazing downside surprise markets up only 2%, I guess markets expect Powell to scream like a hawk and bring the markets to its knees.

 

[edwardZ]

woooo new thread! we "survived" the year...i guess

all just waiting for FOMC news to be over before taking actions again.

 

[stanlawj]

This seems a bit non consensus. Most EMs are not leveraged and DXY has actually started falling.

2023 will be the year when something breaks because interest rates went from 0 bps to 450 bps in 1 year. Sovereign debt crisis and Asian Financial Crisis style currency runs are on the radar. This is especially if inflation remains sticky and US interest rates have to continue to rise. FED is working with ECB to ensure that Europe is ok given the war in Ukraine. No one is looking after the rest of the world.

Aurvandil is partly correct. The timing is the issue. You can say market crash and then liquidate all stocks, but market continues to go up while you are out of market. So what do you do?

You can say market going up, but market continues to crash, until you're down 80%.

Right now, I'm 60% plus long. No shorts. Market is up. The turn down will come, but not yet, and we don't know how funds will flow. Note that the actual money flows in reaction to any event is more important that the fundamental economics theory. Sometimes the flows take place much earlier in anticipation of economic events, so the flows actually reversed during the occurence of supposed economic event itself.

 

[RedsYWNA]

Inspite of the amazing downside surprise markets up only 2%, I guess markets expect Powell to scream like a hawk and bring the markets to its knees.

Market surprisingly closed very weak. Maybe try another short later, with stop loss in place...haha

 

[DevilPlate]

I am also surprised to see weak closing.
Good for intraday trader. Casino action LOL

 

[elvintay07]

Market is like that one la. When economy is damn strong, the narration will be Fed will increase rates till we die, inflation is going to kill us. So now inflation stabilise and Fed slowing down interest rise, the narration is about recession, depression etc…
I feel now all these investors become more of “story tellers”.

 

[DevilPlate]

Market is like that one la. When economy is damn strong, the narration will be Fed will increase rates till we die, inflation is going to kill us. So now inflation stabilise and Fed slowing down interest rise, the narration is about recession, depression etc…
I feel now all these investors become more of “story tellers”.

Actually I believe all these stories comes from WS haha

They wish for a mild recession so that FED will pivot.