Cross-asset Strategy: Investor sentiment is reaching extreme weakness, with the AAII bull-bear survey metric recording its lowest reading since early March 2009, just before the GFC trough. This, in combination with light investor positioning and better than feared Q1 earnings, should allow the market to rebound. We reiterate Energy as our highest conviction sector OW…...
Research Report Excerpt #1 Q2-Q3 are the weakest 2 quarters of the 4-year cycle (shown above), averaging losses of -1.2% for DJIA and -1.5% for the S&P 500 since 1949, and -5.0% for the NASDAQ since 1971. Again, these are the stats for the Q2-Q3 period of the 4-year presidential cycle, not the whole year.…
After a first quarter decline for the major averages, and during a midterm election year, it became clear that 2022 was going to be a struggle for investors. There was no guarantee the year would bear a negative return then, but it is becoming increasingly probable after a significant market decline in April came to…...
Bear markets start one of two ways, and we don’t think either cause is present currently. We call them the “wall” and the “wallop.” The wall refers to the proverbial wall of worry bull markets climb. As Sir John Templeton described famously: “Bull markets are born on pessimism, grow on skepticism, mature on optimism and…...
With defensive stocks now expensive and offering little absolute upside, the S&P500 appears ready to join the ongoing bear market. Defensives can still outperform but it’s just a relative trade at this point. Inflation is peaking but that’s not bullish, because it means margins & EPS have peaked too. Harder to hide… Over the past…...
Research Report Excerpt #1 Taking a step back for a moment, recognizing the landscape for 2022 doesn’t inspire a great deal of positive market sentiment, we are better able to see the forest for the trees. Recall that in 2020, with a pandemic-influenced, self-induced economic shutdown, the S&P 500 rose some 18 percent. In 2021, the…
A midterm election cycle and year 2 of a Presidential cycle with rising rates and potentially peak inflation have hijacked the bull market. This is not surprising and as such many an investor is asking themselves why they hadn’t gotten out of the market ahead of time. This is a question being asked with the…...
The best hedges are cash and time, which work in tandem! The answer to fear of downside risk is not opening a NEW POSITION (hedge); there is simply no logic in such an exercise when fear of downside risk/losses is the premise! Risk of taxing one’s portfolio gains increase with a positioned hedge. Risk of…...
A lot has been going on in markets – aggressive Fed talk scaring investors, runaway commodity prices, war in Europe, COVID reopening in some parts and closing in other parts of the world. One should not be entirely surprised that all of this resulted in investor sentiment falling to 30-year lows (e.g., AAII % bulls…...
No Clear Path to Easier Financial Conditions Financial conditions are a key transmission mechanism for monetary policy and geopolitical shocks to effect the real economy and profits. Monetary policy tightening, for example, works by raising private sector borrowing costs on mortgages and corporate debt to slow growth and inflation. That process is well underway. The…...
