JPMorgan On 2018 Melt-Up Parallel: ‘Any Near-Term Equity Correction Is Buying Opportunity’

JPMorgan On 2018 Melt-Up Parallel: ‘Any Near-Term Equity Correction Is Buying Opportunity’

More than a few analysts and investors have identified what they believe is a parallel of sorts between equities perched at record highs headed into 2021 and the market melt-up that transpired in early 2018 following the Trump tax cuts. The comparison isn't perfect, but I suppose it doesn't have to be. After all, we're just spinning narratives and if you like old adages, history doesn't repeat, it just "rhymes." All four major US benchmarks hit records on the same day last week, prompting more
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5 thoughts on “JPMorgan On 2018 Melt-Up Parallel: ‘Any Near-Term Equity Correction Is Buying Opportunity’

  1. There is a flaw in the JPM equity positioning indicator which needs to be mentioned. It does not account for the fact that overtime there is a demographic trend toward holding fewer equities due to baby boomer retirements. If you look inside that cohort the key age is 70, that is when it is optimal to take you social security discernments and to liquidate or scale down the asset holdings to less risk seeking ones. Admittedly there is some evidence that this is happening in a much slower way than it prudent, but it still helps to explain the graph.

  2. Vlad, you wrote ” If you look inside that cohort the key age is 70, that is when it is optimal to take you social security discernments and to liquidate or scale down the asset holdings to less risk seeking ones.” I will be there (age 70) in 2-3 years and I plan to wait until age 70 to take social security. I plan for social security to cover all of my expenses. In this case and considering that my timeline is “infinite” (i.e. my kids and grandkids will get my funds, equities and properties), why would I consider “less risky” assets which provide almost no return? An equity crash would be great but the current appreciation is also “appreciated.”

    1. If SS will cover all your expenses, then you are set and in an enviable position.

      What was your thought process for how you planned on the estimate for how long you will live, what inflation will be over this time, what changes in tax policy might occur over this time, and health care costs you would reasonably expect to have to incur?

      One answer I’ve given to these questions is a bottle of Makers Mark, a bottle of Valium, a beach chair, and the outgoing tide.

  3. One of the most repeated phrases justifying the melt up that led to the February 2018 melt down was “synchronized global recovery.” You can hear that same mantra daily on CNBC or Bloomberg, and although that should give anyone pause I do believe it is more accurate this time. We can certainly have a correction in the near future, may be one as painful as the Volpocalipse, but I believe the narrative of a global recovery makes more sense now than it did back in 2018. Parts of the “globe” such as Asia are clearly recovering already, the dollar is weaker, the Fed is loose and tariff man is on the way out, it might be a global recovery that features less US and more EM but several leading indicators point towards an acceleration of growth in the near term, a successful distribution of Covid vaccines would only strengthen this impulse.

  4. runamok: My computer objected to a Cross-site Scripting risk when I tried to post my original reply earlier today. My thought about your “one answer” is to suggest that you have floats on your beach chair so you can drift out to sea with the outgoing tide as you drift off. Your answer certainly sounds better than spending years or decades in a nursing home, possibly strapped to your bed, while all your funds (& estate) drain away paying for your care.

    As for your questions about lifespan, inflation, health care, taxes, etc., who knows? A friend of mine was born in 1920 and has slowed down some but still enjoys life and goes to his office when he feels like it. My mom is approaching 90 but still runs her own retail business. You or I could step in front of a bus tomorrow or live well past 100. Spending lots of money after turning 60 or 70 or 80 doesn’t necessarily improve your quality of life; I would rather own a few things than to have things own me.

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