Stocks, Bonds, Sentiment Enter New Week At Breaking Point
Traders and investors enter the back half of May in decidedly poor spirits.
Ironically, that may be the most compelling argument for a near-term, bear market rally. Sentiment extremes are decent contrarian indicators and market participants are extremely disheartened.
A dubious, late-week upside romp couldn't save US shares from another weekly decline, the sixth consecutive (figure below). At the same time, bonds are a basket case, which means risk parity, 60/40 and multi-asset portfolios in g
Total market cap of US equity and fixed income is something like $80 TR? Or more.
$80 BN outflow is a lot, but suggests that average discretionary investor’s cash level cannot have increased by all that much. A percentage point, maybe.
Not much aggregate derisking done to date.
H-Man, I agree that nothing has changed in the macro to warrant a significant rally in equities or bonds. It simply is a very ugly picture.
I’m thinking watch for some incremental less-negative news that could trigger a “transitory” bear mkt bounce. Covid lockdown ease in Shanghai, perhaps. Then as next FOMC approaches, and start of actual QT, window of oppty for derisk starts to shrink.
H-Man, I wandered into 80’s inflation (prime at 21%) and found that 10.3% inflation in 1981 didn’t slow down to 3.2% inflation until 1983. So how long will it take to get to 2.5%?
My retirement portfolio, largely in cash for the past 3 years is down only 0.8% on the year. There is one safe place to be right now.