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.
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