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Random Market Thoughts

I haven’t updated my blog in a while, so here are some random market thoughts (in no particular order):

1) In mid-December 2021, I turned cautious on the market, mainly because the Fed started talking about taking all their accommodation away. In a series of announcements between early December 2021 and mid-January 2022, the Fed discussed ending their bond purchases, raising interest rates, and decreasing their balance sheet. Since then, their hawkish actions have provided a serious headwind for the market.

2) Since April 2022, my message has been the same: We’re in a downtrend and I’m not expecting any SUSTAINED uptrend until the Fed is done with their rate hiking cycle. I wrote about it publicly on my blog and went on TV to reiterate the same message in April.

3) Is it possible the market has discounted most of the rate hikes? Of course it’s possible, but my instincts tell me no and that we are likely to see a new low within the next few months. Again, if the Fed pauses and changes their hawkish stance earlier than the market expects, I will be flexible and adapt.

4) Will it be a straight line down? No, it never is. There are always countertrend rallies along the way, but the problem is they are too tough to time and again, they are not SUSTAINED. Also, a slow grind lower would torture people the most and REALLY test their patience.

5) If you are inclined to trade, keep your positions light to help you from getting tossed around in this higher volatility environment.

6) What if I want to buy something that I love for the longer-term? Ask yourself have you really done the fundamental work on the company, or are you just married to a story because the stock went up 100-500% during the pandemic? If you REALLY like a beaten down name for the longer-term: scale into to it (don’t buy it all at once), be willing to add lower, and keep in mind you will have to be VERY patient for the stock to get through all the overhead resistance.

7) I still think there are many investors who are married to the same 10-15 pandemic stocks that are down 50-80% from their highs, and they are NEVER selling. The market might have to “wear” these people out before finally bottoming.

8) The good news is there will be INCREDIBLE opportunities when we come out of this correction. You just have to be patient and disciplined until the market shows signs of the big institutions consistently coming back in.

If you’re looking for regular analysis on the market as well as strong stock ideas, here’s the link to my Educational Product. I’ve received great feedback from the members and I’m confident you will learn a great deal when you sign up!

I can be reached at: jfahmy@zorcapital.com

Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained in this video constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned in this video. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.

Brainwashed

There’s a generation of new investors that think stocks go up forever. Before I continue, I would like to emphasize two points: 1) I’m not being critical because when I first started investing, I thought the same thing. 2) Over a 10, 20, 30-year period, the indexes always go up, but the majority of individual stocks do not.

The stock market is a master manipulator. It conditions us to think a certain way over and over and over until we are finally convinced of a pattern. Then, just when we think we have that pattern figured out, the market magically changes character. The pattern that most newer investors have engrained in their minds is “Buy the Dip,” and I don’t blame them. I’ve written for years that the central banks put together a globally coordinated effort to keep interest rates low and the markets high. As a result, buy the dip has worked very well for years.

Then, in early December 2021, I started writing about how the Federal Reserve was taking away all of this accommodation and to be defensive. Here’s the problem: Too many people were married to the same group of 10-20 pandemic stocks. Again, I don’t blame them because people rarely see gains in individual stocks. So, when certain stocks appreciate +200-500%, they are married to these stocks and their stories and most likely NEVER selling.

Considering the market’s recent decline, I’m still shocked at the complacency with certain stocks. Again, I’m not being critical because I did the same thing when I first started 25 years ago. What got me to change was studying historical charts and the statistical patterns behind growth stocks. The thing that shocks me more is how certain professionals think these stocks are coming back to new highs when the probabilities are very low if you study history. It’s going to take time to unwind this brainwashed psychology that was created over the past few years.

I can be reached at: jfahmy@zorcapital.com

Disclaimer: This information is issued solely for informational and educational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. None of the information contained on this site constitutes a recommendation that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. From time to time, the content creator or its affiliates may hold positions or other interests in securities mentioned on this site. The stocks presented are not to be considered a recommendation to buy any stock. This material does not take into account your particular investment objectives. Investors should consult their own financial or investment adviser before trading or acting upon any information provided. Past performance is not indicative of future results.

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