undefined undefined/iStock via Getty Images
Pessimism is ubiquitous in the stock market, with traders telling BofA Securities that a further 8% drop in the S&P 500 (SP500) (NYSEARCA:SPIE) is a bullish scenario.
“Heard on the street: ‘3600 is the’ new bull case,” strategist Michael Hartnett said in his weekly Flow Show note on Friday.
US GDP was $24.4T in the first quarter and the global stock market capitalization collapse since its November 2021 peak was $23.4T.
The “stock market was actually down 1 US economy in 6 months,” Hartnett said.
But equity flows are not yet at the capitulation level and his stance is still sell-any-rips.
Investors should also look to the yen (FXY), as virtually every stock market crash in the past 40 years has produced “sharp, rapid yen appreciation.”
Of the “19 US stock bear markets over the past 140 years, (the) average price decline = 37.3% and average duration 289 days,” he noted.
If that were to be repeated, the current bear market would end on October 19, 2022 with the S&P at 3,000 and the Nasdaq (COMP.IND) (QQQ) at 10,000. The yen and the Swiss franc are hedges for this.
The bearish unexpected cyclical risks are:
Wall Street’s assets are 6.3x US GDP. As “seen in 2020, the fastest route to a deep recession is via a Wall St crash (and vice versa).”
Housing and labor markets are “just at inflection points”. The US home purchase index is falling. Retail layoffs can hurt, as retail has accounted for 12% of all job growth in the past two years and leisure and hospitality 33%.
Inflation “impedes the response function of the Fed, polarization hinders the response function of fiscal policy in a crisis, recession.”
“Banks (are) arguably the safest part of the financial system to date (BKX) index trading below the highs of ’07, ’18, pre-COVID ’19. A break below 100 could signal a recession and/or credit event ( and) shouting tougher lending standards in coming quarters.”
The leveraged loan market (is) cracking, bond/stock/real estate systemic risk deleveraging in risk parity (RPAR), private equity (PSP) high, PE exposure to syndicated loans high, sovereign wealth funds, credit events in speculative technology, shadow banking, US consumers buy now, pay later, European credit/banks/housing, emerging markets, zombie companies, etc… and the Fed hasn’t started QT yet.”
Goldman Sachs recently released its recession scenario.
#bull #case #sell #rips #watch #yen #crash #warning
Comments
Post a Comment