So we are probably all aware of the stock market sell off that is currently occurring.
It's likely due to a combination of things...
The reflation trade reaching a short term top...
The holiday weekend profit taking...
And a bit of a rotation out of tech to value.
Stocks have been hit pretty hard.
And when stocks are hit hard...
The financial media have a field day.
The problem is that the financial media trot themselves out when the 'knowns' are available...
That is, once the move has happened.
So listen to this.
Whenever CNBC releases their 'Markets In Turmoil' segment...
The SP500 has an average weekly return of 1.5%...
Over 3 months, that return jumps to 5.4%.
And after a year...
A staggering 20.8% average return after this segment.
Guess what?
CNBC just released this segment this afternoon.
Now, I'm not saying this is a bottom (although it could be)...
But it's something to pay attention to, alongside other factors that may prevent you from catching a falling knife.
Being a bear is a tricky thing to be when the fundamentals don't necessarily support a bearish market.
What I mean by this is that the risk free rate of return is all that matters - and that risk free rate of return tends to be the US 10 year benchmark yield....
Central bankers are very dovish, which means that they support more liquidity via monetary easing, which implies even lower yields in the mid term.
No matter what you think of valuations - generally people think they're too high - the equity risk premium (the price paid above the risk free rate of return) is extremely low.
Until this decompresses, risk will remain bid, and tech stocks will remain acting like sovereign bonds (acting like a replacement for this risk free rate of return).
I think you can tell what my stance here is!
It's likely due to a combination of things...
The reflation trade reaching a short term top...
The holiday weekend profit taking...
And a bit of a rotation out of tech to value.
Stocks have been hit pretty hard.
And when stocks are hit hard...
The financial media have a field day.
The problem is that the financial media trot themselves out when the 'knowns' are available...
That is, once the move has happened.
So listen to this.
Whenever CNBC releases their 'Markets In Turmoil' segment...
The SP500 has an average weekly return of 1.5%...
Over 3 months, that return jumps to 5.4%.
And after a year...
A staggering 20.8% average return after this segment.
Guess what?
CNBC just released this segment this afternoon.
Now, I'm not saying this is a bottom (although it could be)...
But it's something to pay attention to, alongside other factors that may prevent you from catching a falling knife.
Being a bear is a tricky thing to be when the fundamentals don't necessarily support a bearish market.
What I mean by this is that the risk free rate of return is all that matters - and that risk free rate of return tends to be the US 10 year benchmark yield....
Central bankers are very dovish, which means that they support more liquidity via monetary easing, which implies even lower yields in the mid term.
No matter what you think of valuations - generally people think they're too high - the equity risk premium (the price paid above the risk free rate of return) is extremely low.
Until this decompresses, risk will remain bid, and tech stocks will remain acting like sovereign bonds (acting like a replacement for this risk free rate of return).
I think you can tell what my stance here is!
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