US market thesis

NJC
2022-08-09

‌The main fear factors

- FED raise rates

- Future earnings recession

- Recession

- War

General market consensus now :

- FED rate hike predicted to end by summer 2023 ( May/June )

      - So the market is pricing it in already. ( Stock market is forward looking )

             - Pricing in by 2023 summer, stock price will be higher than now.


- Big money leaving - Bank of America say + VIX is lower than its suppose to be at

      - VIX - not as high as its suppose to be due to main fear factors : War, FED rate hike, recession, future earnings recession + usual hedging contracts.

             - Big money have sold alot, so need lesser option contracts to hedge against their positions.



Thesis :

   - Big money have sold enough ? Thats why BofA reported it. ( Big money shunning stocks )

          - Analyst / fund manager say market is neutral / good when selling so they can sell at higher price & at bigger volume. 

          - After selling enough, analyst say it’s going to go down so when it goes down they can claim credit (?)

     - Big money have sold enough so not selling anymore / selling at a slower pace

          - BUY > SELL = UP … probed up valuation … temporary upward trend ?


Recession fear

 - Powell said they are going to do everything in their power to stop inflation in almost every FOMC meeting, most prominently in the July 6th FED minute & many others.

 - But now all analyst & media outlet are pin pointing specific word Powell say to point towards the direction of a FED U-turn, I think it might be another event of analyst selling good news while selling their stocks.

 - After all , US just experienced a technical recession, although the job market is good. But the FED will take the job market as a soaking sponge to raise rate.

 - It is already happening & companies are one by one reporting weak outlook in the coming quarters & laying off workers. We see headlines like Apple, Meta,  Walmart etc. But smaller ones are definitely affected.  as well.

 - If this continues,every quarter we will see company CEO coming out and give weaker & weaker consensus, thus rinse and repeating earnings recession, driving market prices lower.

 - So even if FED rate hike indeed stops at where market is pricing it ( 2021 summer), the price level would most likely be lower than where the market is at now. 

 - This is why I think that institutions giving positive outlook are actually selling their portfolio now. Also remember just a while ago retail buying has been high ( can’t remember the percentage ). 




Take away :

Everything in the market now can be voiced as good & bad very easily. ( perfect opportunity for big money to reduce their positions )

E.g.

Jobs data

 - If its a beat :

      - Good for economy

      - Bad cause FED rate hike sponge

 - If its a miss :

      - Good cause FED rate hike sponge

      - Bad for economy

FOMC

 - FED rate hike higher :

      - Good for economy long run

      - Bad for biz now

 - FED rate hike lower :

      - Good for biz now

      - Bad for economy in the long run 




Macro Trend
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Comments

  • PandoraHaggai
    2022-08-12
    PandoraHaggai
    The bear market will not end so soon, after all, the rate hike has just begun.
  • DonnaMay
    2022-08-12
    DonnaMay
    Powell should do more to nurture the stock market.
  • HilaryWilde
    2022-08-12
    HilaryWilde
    The worst of the rate hikes is over.
  • EvanHolt
    2022-08-12
    EvanHolt
    I sense that the mood is overly pessimistic.
  • Maria_yy
    2022-08-12
    Maria_yy
    Recession is coming, that's a fact.
  • 痴痴虎
    2022-08-10
    痴痴虎
    k
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