Buy The Dip Or Sell The Cut?
Did you buy the dip?
US equities will head into a very challenging seasonal down around 5.5% over three weeks. As noted here, the current pullback looks almost exactly like April's stumble in that regard. That dip was a "buy." I don't know about this one.
August is the worst month of the year for flows, but folks were still putting money into stocks (on net) into the July FOMC meeting -- i.e., in the week to July 31. US equity-focused ETFs and mutual funds took in $4.5 billion over that period
Guess I should have read this before commenting on the #Sahm article. The last paragraph sums up nicely why the long duration aspect of big tech and assumed rate cuts are already priced in for them. In the near term, I’m betting on long bonds, but I would love a 20% pullback as I’m still very bullish long-term on AI. It won’t be great for employment despite the protestations of those who say innovation always creates new jobs, but big tech will reap the rewards with higher profit margins and revenue growth over the long term. I also see AI and white collar displacement as a reason why ZIRP or something close to it will become the norm.
Buying into this is not necessarily a yes/no binary decision. Scaling your buy is often a good practice. Maybe allocate 25-33% of your buying budget now and see what happens…and then make another allocation down the road…
Heisenberg, what was the inflow into bonds (ETFs) vs equities? If such graph exists?
Bond funds in aggregate took in $14.6 billion over the period. Treasury funds took in around $3 billion. UST-focused ETFs and mutual funds have seen inflows for three months straight, consistent with three straight months of gains for USTs as an asset class.
Your context and personal take on this dip has been instructive but I’m finding it a little difficult to buy the big bad bear biting the market into oblivion. If you and Claudia Sahm are correct and this isn’t a Bad Recession, then why shouldn’t the read through for rates come into stocks rather quickly? I caught where you said they are already prices in, but are they already priced out? Like, these wall street narratives give the business news industry something to write about and charge us idiots for the privilege of its contemplation, but doesn’t one narrative’s ascendance telegraph its own demise? We’re all ginned up on the fear now. Is Savita Subramanian preparing her “recession fears overdone” memo?
Perhaps you should follow RIA’s advice in the comment above. It does not have to be all-or-nothing.