Patience

Traders (and investors) are wise to remain patient through this tightening Fed cycle. And whilst it is maturing... there's still more to go. Here I take a look at recent recessions... and some lessons to draw from. Don't be in any hurry here - we are likely to be headed lower

Excited About the Opportunity Ahead!

I bring good news and bad news. The good news? We have done a lot of the heavy lifting. The rate rise cycle is maturing. Inflation is falling. And China appears to be re-opening. Now the bad news... rates are not about to repeat what we saw the last decade. And the Fed is sucking out liquidity. What's more - corporate earnings are about to contract. Put that together - stock prices will likely fall. And that will represent opportunity...

Is the Market Fighting the Fed?

The market and the Fed are at odds. In short, equities don't believe what Powell is saying. The market is betting the Fed is wrong and will be cutting rates by the second half of 2023 - where the 'dot plot' of 5.0% is a dream. My take: choose to fight the Fed at your own peril. Typically it doesn't work out well.

The 40-Year Tectonic Shift

2022 will be remembered as an important turning point. Not because the S&P 500 surrendered 15% to 20%... it will be remembered for the tectonic shift in monetary policy. For the first time in over a decade - interest rates are finally trading at closer to "normal levels". What's more, we are not going back to 0% to 2.0% rates for a long time. And that has many implications for how to choose to invest...

A Textbook Reversal

We've experienced a 16% rally off the October lows. And it's happened in short time. Why? Traders see a far more dovish Fed on much lower inflation / coupled with a mild recession. I'm not buying it... not yet.

Sorting the ‘Wheat from the Chaff’ in 2023

There are two key criteria that every investor should execute in 2023. What worked for the past decade will not be the same for the next decade. Interest rates are going to be higher for longer. This post explores what that means...

Powell Pop… Don’t Get Too Excited

The market is popping on the hope of a more dovish Fed going forward. Chairman Jay Powell gave the market 'hope' by saying the Fed is likely to moderate the pace of hikes. But is that 'really' that bullish?

Oil: 2023 Supply Shock Coming?

2022 delivered the market a nasty oil shock. But will it be the last? I don't think so. The oil price shock in 2023 will be due to massive underinvestment from the US in hydrocarbons (which still power 80% of all our energy needs). And if oil should fall to $65 to $70 - that spells opportunity for the year ahead - where I see oil back above $100.

Watching the VIX for a Market Reversal

With the VIX approaching a level of 20 - the market feels overly complacent. The S&P 500 is now around 15% off its October low - resembling what we saw in June. My guess is should we see the VIX below 20 - expect the market to reverse shortly thereafter.

A Framework when Thinking about the Fed

How fast? How high; And for how long? That's the framework when thinking about the Fed's policy moves. From mine, the market are offside in terms of how high and particularly how long. What we do know is the pace will slow.

My Hypothesis into Year End

I have four key hypothesis into how I am positioned for year end: (i) 2023 will bring a recession; (ii) earnings will contract; (iii) multiples will compress; and (iv) it's premature to think about fighting the Fed. Let's explore...

Classic Bear Market Rip

Stocks are likely to push higher through to the end of the year. It's what we usually find after mid-term elections. But for now, this feels like another bear market rally... which will likely find resistance around the zone of 4100 on the S&P 500. We are a long way from any Fed "pause or pivot"...