Optimism as a "Soft Landing" achievable?
Now the first month of 2023 is almost over, and we had a great start in the financial markets, actually, a fantastic start, as Goldman Sachs stated a couple of days ago.
This month's straightforward story of the macro environment has been reassuring for bulls across the markets. Both in the legacy markets and the crypto markets. It looks like the stars are aligned! Inflation is falling, and employment numbers look okay. Policymakers seem to have things under control.
We have seen some people declaring that the "soft landing" is real, inflation was transitory after all, the pain was just for one year, and the fear of a recession or depression was overblown. It seems like we got injected with 5ml of hopium.
Reality check, taking a closer look at "recover"
Although some may be hasty in drawing judgments, dunking on "bears" for missing the bottom, the facts are still available.
Even with indications of improvement, it seems like we collectively have the memory of a goldfish. It seems like we forgot we are still in the aftermath of the epidemic, and complicated geopolitics and the full extent of its effect have yet to be seen.
We must maintain some skepticism and reasonable expectations, especially concerning the core PCE (Personal Consumption Expenditures), which may have trouble meeting the 2% target.
Even while things may appear good on the surface, we need to take a step back and try to confront reality.
Since the start of this year, the old diversified 60/40 portfolio strategy (60% equities, 40% bonds) has been working again. According to market data, it has been the most profitable strategy this year again since 1987.
However, continue with caution. Maybe a "set and forget" overleveraged long and "long your longs" might be a bad idea as you might corner yourself into a risky position. As GS suggests, try to keep taking profits by selling your bags into strength if the S&P500 reaches around $4000 - $4300
A sane person doesn’t want to pay an 18 P/E multiple for 0% expected earnings growth.
Now the first month of 2023 is almost over, and we had a great start in the financial markets, actually, a fantastic start, as Goldman Sachs stated a couple of days ago.
This month's straightforward story of the macro environment has been reassuring for bulls across the markets. Both in the legacy markets and the crypto markets. It looks like the stars are aligned! Inflation is falling, and employment numbers look okay. Policymakers seem to have things under control.
We have seen some people declaring that the "soft landing" is real, inflation was transitory after all, the pain was just for one year, and the fear of a recession or depression was overblown. It seems like we got injected with 5ml of hopium.
Reality check, taking a closer look at "recover"
Although some may be hasty in drawing judgments, dunking on "bears" for missing the bottom, the facts are still available.
Even with indications of improvement, it seems like we collectively have the memory of a goldfish. It seems like we forgot we are still in the aftermath of the epidemic, and complicated geopolitics and the full extent of its effect have yet to be seen.
We must maintain some skepticism and reasonable expectations, especially concerning the core PCE (Personal Consumption Expenditures), which may have trouble meeting the 2% target.
Even while things may appear good on the surface, we need to take a step back and try to confront reality.
Since the start of this year, the old diversified 60/40 portfolio strategy (60% equities, 40% bonds) has been working again. According to market data, it has been the most profitable strategy this year again since 1987.
However, continue with caution. Maybe a "set and forget" overleveraged long and "long your longs" might be a bad idea as you might corner yourself into a risky position. As GS suggests, try to keep taking profits by selling your bags into strength if the S&P500 reaches around $4000 - $4300
A sane person doesn’t want to pay an 18 P/E multiple for 0% expected earnings growth.