It’s fair to say this is one of the more hated stock market rallies. Why? Rarely have I seen so many caught on the wrong side of the trade. Sentiment is overwhelmingly negative. And yet the S&P 500 is up ~20% from its October low. This missive outlines both the bull and bear case. Either side can make valid arguments. This is what makes things so interesting. In short, you must have exposure to this market. However, you should do so with your eyes wide open.
"Investing Lessons"
Powell’s Punch
In what was supposed to be a ‘vanilla’ testimony to Congress – Jay Powell turned this into a market moving event. Not pleased with how market participants interpreted his previous address – he set the record straight that rates will be higher for longer. His testimony left no room for ambiguity – it was full hawk. Markets quickly revised their forecasts for the peak Fed funds rate – with some now thinking 6.00%. What’s more, the 2/10 yield curve is now negative 107 basis points. We have not seen that since 1981. Soft landing? Good luck.
Remain Wary of Permabears
Jeremy Grantham is a well known permabear. This week – he called for a possible 50% correction. Sure… it’s probable we see something in the realm of 20%… but 50%? I decided to look at Grantham’s track record against the S&P 500 over 25 years. Guess what – he has woefully underperformed the market. Hardly surprising. Beware of doomsday ‘crash callers’ like Grantham… and he is not alone. They are dangerous.
Foolish Forecasts and Questions Worth Asking
It’s the last trading day for 2022 – which means it’s time for some ‘foolish forecasts’. The S&P 500 booked a 19.4% loss this year… its 4th worst since 1945. My foolish forecast is the lows are not yet in… however 2023 will represent opportunity.
For a full list of posts from 2017…