One of the questions I’m asking myself is which will bottom first, bonds or stocks? If the VIX continues to rise and assets crash, wouldn’t that slow down or even reverse the increase in rates by the fed, which would in turn lead to a rally in bonds? Another way of putting it is that in a hard landing scenario I would expect long term treasuries to recover somewhat while more risky assets continue to suffer.
You’re right about assets crashing will eventually hit the economy causing a reversal of policy. The risk is if inflation isn’t lower when it happens. Then we have the nightmare scenario where the economy is crashing, and the fed can’t cut rates.
I think bonds will bottom when people believe the fed is done increasing rates. They hit a short-term bottom mid-June when people thought rate hikes were closer to ending. Since then, we’ve seen high inflation numbers which increased expectations for future hikes and bonds took out that prior low.
I think the odds of a soft landing are decreasing every day. We’re in unprecedented territory with the size and pace of rate increases. Unprecedented territory rarely ends well.
I think the hindsight analysis will be the fed should have been gradually raising rates a long-time ago when the economy could handle it without slowing growth. They didn’t because inflation was low, so there was no sense or urgency. That just coiled up the spring, so when inflation started it exploded. I think future policy will be to gradually increase during times of economic growth. This will define future policy the way the Great Depression still does.
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FED many times said that they do not plan to raise rate until it occurs. When it occurs, they act as raising interest rate will put more pressure on economy.
In fact, this has peaked Jan 2018 (Resulted Dec 2018 crash), Dec 2019 (Resulted crash) and now again. At those times, JP went through high pressure from Trump and other Reps not to derail economy…etc.
VIX has to soften (now extreme end) from here, it can not go spirally as we are entering to quarterly reports in next 15 days.
Most companies close financials by Sep 30th, Rumors or leaks of financial data will attract market and take it up as market is way below second time. Mean PCE Inflation Rate 30-SEP-2022 Friday coming. It has to turn bullish any time from here.
FED has to stop raising rates first and then take few months to reverse, it is long shot still.
I am no expert, but can provide a guesstimate (Remember everything can be wrong) is market settles between 2850 (worst case) and 3150 (best case) before Dec 31, 2022.
It is almost 40% (EW-FIB 38% level) from ATH 4818 where market will likely settle this time.
Warning: NO GUARANTEE, DO NOT TAKE ANY ACTION BASED ON THIS.
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IMO, Year 2020 VIX cycle was different from now. Year 2020, market dropped like falling knife Between Jan 17th and Mar 23, 2020, just in 2 months timeframe it went down 30%-34%.
Now, it started in Nov 2021 and going down and up like a slow killer which resembles 2007-2009 decline. VIX is lower now as they take time to sell.
Using 2020, we can not judge or expect changes this duration. This one takes still more longer time frame to hassle every investors.
Options were very good by 2020, but not now. I stayed away from it long time, the whole year, and today I just took very few SPY call options. When VIX goes down, IV crush will give negative returns this year.
Current environment is more than harassing the long term investors/holders.
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of individual stocks. Perfect for buy+hold forever S&P investors using DCA + DRIP approach.
When such opportunity comes, no one will have excess cash to buy DCA ! Unless someone is intelligent enough to allocate 30% cash and 70% market, it is not possible to buy at DIP.
This is very common issue.
Choosing individual stocks is not easy.
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No excess cash to DCA? Joking? Are you equating DCA to DIP?
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Most of the S&P Investors buy them bulk and hold for long. There are proven asset allocation formula to have 60:40 or 70:30 ratio (stocks:bond). If they do not follow properly, they land up fully invested and cash less when market dipped. It is needs timing and market sense. It is very difficult to hold the hands.
Who says bubbles are over.
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No more QT in UK. QE again.
What did he say? Did he say yield will keep declining for … weeks/ months?
Pull up the TLT chart and do some TA. Knox also bought last week for his personal account.
Ken Griffin is pretty positive on US consumers:
The fact is a 4% risk free return in bonds is very attractive to a lot of people. Ken Griffin again:
I exited. He’s big enough his buying probably moves the market. Plus, others follow his lead.
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WS continues to pressure retail investors to capitulate by shorting AAPL and TSLA.
This is just rotation, some vested people short, buy puts, create all rumors (real or false) bring down heavily for their profit.
This is the issue with single stock, people selling their stake or shorting will bring down stocks heavily, but market changes are very less.
NFLX they brought down 30% single day, but index impact is slow.
Market has DCBed yesterday May have long life to Kick us badly until Tuesday or Wednesday.
DCB is killer, Play very safe, keep lot of cash for possible better opportunities.
It appears yesterday was an anomaly. Unemployment is even lower, so inflation pressure on wages isn’t going to improve.
Day before yesterday was unique setup where market reached it extreme bottom where it was unable to go down(dead locked). Based on that I bought call which partially I sold when I saw profit. This was very rare occurrence (once in two years or some recession). Market has released the shorts or puts. Now, they have power to pull down more or push up. Ultimately, market managed to get the control.
This is pure guess work based on past 2018 and 2020 experience( (Nothing guaranteed, everything I say can be wrong).
Additionally (Nothing guaranteed), market is in mood to go down and down to extremes by crazy way (in between one day DCB) until circuit breaker or near circuit breaker comes in.
When circuit breaker kicks, then only it will hit the heads of FED. Otherwise, they will not stop raising rates. The purpose of drop is FED has to account now!
Save your cash for possible bottom with “Circuit breaker kicks in”.
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