MY BEARISH THESIS
-This rally is led by fundamentally weak companies like CVNA, ROKU, AMC, and AFRM (companies with weak valuations) which has historically indicated that these types of rallies are temporary
-Six Month Treasury Bill yields rising to 5%, last seen in 2007
- The Feds Fund Rate (Feds target interest rate) rose higher after the recent CPI data which means the Fed must raise rates more aggressively to combat inflation
-50% base point rate hike probabilities are increasing for the next meeting
-Mortage Application volume fell 7.7% last week as mortgage rates rose
-The average rate for a 30-year mortgage rose from 6.18% to 6.4% in the last two weeks
-Employment number came in over double than expected which will cause Wage inflation
-Retail sales are up 3% month over month, crushing expectations (2%), spending continues
-Restaurant Retail Sales up 7.2% in January, strongest since March 2021
-Used car prices have increased 4.1% in the month of February and it's only the 18th
-Credit Card Debt hits a record 930.6 billion, up 18.5%
-Multiple large cap Company Earnings have missed and have started layoffs
All this means that the average consumer hasn't stopped spending despite inflation and high interest rates. This will cause the Fed to continue hiking interest rates or keep interest rates higher for longer which is not sustainable for the consumer. Overall, the fundamentals and the data is showing that this rally is temporary, and we will go lower. How low we will go is not yet known for the equities market, but many analysts believe new lows are not out of the question.
$SPY
-This rally is led by fundamentally weak companies like CVNA, ROKU, AMC, and AFRM (companies with weak valuations) which has historically indicated that these types of rallies are temporary
-Six Month Treasury Bill yields rising to 5%, last seen in 2007
- The Feds Fund Rate (Feds target interest rate) rose higher after the recent CPI data which means the Fed must raise rates more aggressively to combat inflation
-50% base point rate hike probabilities are increasing for the next meeting
-Mortage Application volume fell 7.7% last week as mortgage rates rose
-The average rate for a 30-year mortgage rose from 6.18% to 6.4% in the last two weeks
-Employment number came in over double than expected which will cause Wage inflation
-Retail sales are up 3% month over month, crushing expectations (2%), spending continues
-Restaurant Retail Sales up 7.2% in January, strongest since March 2021
-Used car prices have increased 4.1% in the month of February and it's only the 18th
-Credit Card Debt hits a record 930.6 billion, up 18.5%
-Multiple large cap Company Earnings have missed and have started layoffs
All this means that the average consumer hasn't stopped spending despite inflation and high interest rates. This will cause the Fed to continue hiking interest rates or keep interest rates higher for longer which is not sustainable for the consumer. Overall, the fundamentals and the data is showing that this rally is temporary, and we will go lower. How low we will go is not yet known for the equities market, but many analysts believe new lows are not out of the question.
$SPY