Remind Me About The Risks Again

Remind Me About The Risks Again

We've reached that glorious point in an inexorable rally when all that's left to do is publish lists of risks. The first four "sentences" of a prominent Bloomberg article published Saturday were: "Delta cases. Inflation. Fed tapering. China’s crackdown." I'm reminded of Donald Trump's amusing attempts to list his accomplishments as president. He'd mention the tax cuts and then, confronted with a dearth of enacted policies, resort to mentioning nouns with adjectives in front of them ("Second
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11 thoughts on “Remind Me About The Risks Again

  1. I still believe that in my lifetime, the US will have socialized medicine, UBI, 35 hour work week, screens/robots replacing entry level workers, significant decline in birth rate. Intelligent immigration policy.
    None of these potential big changes have been “factored in”. Many are deflationary.
    I also am a believer that we aren’t going back to the way things “used to be”. That doesn’t happen in real life, either.

    1. You’re an optimist… or very young?

      IDK, it seems dystopia where those technological advances bungle our social structures into a version of cyberpunk seems more likely? People believe too much in the “just world hypothesis”/are just too conservative to allow for so much hope…

  2. The ultimate long term forecast that I use for planning purposes is contained in the book “2052” by Jorgen Randers. I will probably live long enough to see much of it play out. The powers that be will attempt to maintain the status quo as long as they can but that may necessitate the continuation of even more dovish Fed policies indefinitely.

  3. The calendar is on the list of concerns.

    September and October are fraught months for the Farmers Almanac approach to investing.

    I’ve always thought there is a reason for that.

    Consensus estimates for the year, like newborn babies, start out full of promise and hope: everyone can grow up to be President.

    1Q does little to darken any outlooks, the child is just a late bloomer and any shortfall will certainly be made up in being 2-4Q. 2Q sees mothers increasingly anxious, as Johnny’s lagging development is harder to ignore, but he’s a good boy and his worth and enticing price-to-book will surely be recognized soon.

    By 3Q, the 45 year old underperformer is still living at home, playing video games in underwear, missing consensus estimates and replacing his CFO. As parents and traders wail, “where did we go wrong” and “someone give me a bid”, middle age ne’er do wells get booted from the basement and the holdings list. If they pre-announce, in September; else, in October.

    Then in 4Q, as proud moms glory in their kids who grabbed the brass ring of success, the rest of us, our sad looking portfolios needing quick gussying up, scramble to bid for the defenestrated Johnnies who might in fact be late bloomers, and others trawl through alleys of worn out failures, scooping up meat for the New Year.

    In the peculiar world that is the market, stocks only have a one year lifespan but are reborn every January 1, mayflies on repeat, and expectant investors’ hopes spring anew with the start of each new year’s expectations cycle.

    TL:DR watch out for the next two months.

      1. Delta, inflation, labor and spending are risks for non-tech earnings. Expectations are a risk for tech earnings. Economic growth forecasts for 2H are being downgraded.

  4. I find this idea seems fairly consensus. Taper announcement is coming probably Nov although Sept cannot be totally ruled, out, and personally I am more in the Sept camp, albeit it seems less likely than Nov according to post JH consensus. The second thought is that it won’t matter cause markets have been talked to death about. The thrid thought is that if it triggered a 10 or 15 percent downturn in US equities that suddenly the Fed would back away. I do not agree with either of these last two points–when the Fed shifts policy, even when it is well known, they create market upset. Moreover, it would be such a bad look if they hyperventilated over a sudden drop in equities. They may do that but generally, once the Fed starts to go down a path they continue for a while, the one exception being Dec 2015. It would be surprising to grant the market this power. Sure it may happen and it strikes me that there are many who believe that such a modest decline in equities would cause a 180 by the Fed. I am doubtful on this.

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