We didnt reach the low into the election, when things hit below spx 5000 i will cover most things.
So if you are long in the next week or two, be prepared for some pain. Ill join you as a short term bull soon.
We just experienced a counter rally, going down or up is never in a straight line.
When the FED started to raise rates in March 2022. At that time the Fed said it takes time , over 12 months before the effect of raising rates can cool down the economy. The Fed raised incrementally rates from March 2022 to July 2023. The overnight rate went from 0.25 to 5.5%
Since July 2023 the stock market has reached new highs and bond rates have actually fallen.
The stock market had issues at the same time Japan had issues last Friday into this past Monday.
Now the market is calling for the Fed to cut. Does anyone doubt the fed will cut if unemployment rises or the stock market destabilizes?
While its possible they don't cut, even the Fed set expectations they will in September. What is the rate we are talking about? Its the rate the Fed will pay some financial institutions to deposit their cash with the fed at a set annual rate on a nightly basis.
Notice, this is NOT the 1/2/3/5/7 year, 10 year, 20 year, or 30 year US bond rate. It is not car loan, credit card, or mortgage rates. So a rate cut of the fed rate doesn't automatically cut borrowing costs.
It took 2 years from March 2022 first cut to have material inflation decline about March 2024. Why do people think reducing rates by 0.25 or .5 from 5.5 to 5.0 will positively impact the economy quickly?
It can't because what the Fed rate does is influence financial institutions to seek gains from different financial activity instead of parking cash at the Fed. When banks and other institutions change their investment strategy it takes TIME.
Therefore it isn't possible for a fed rate cut to 'save the economy'. There are potential other events that will give a really good boost for a bit even if unemployment continues to rise. But barring dramatic events, the dice is cast, the market has peaked.
Could we see a new high in the next couple of months, of course. But when the Fed does cut rates, its them saying "we see the economy has taken a turn for the worse", and their action will start to help the real economy, in a year or two.
Now for other potential bad events, last week the reason the US market tanked was Japan had material challenges in their economy, including their stock market falling over 10% in a day, and the Yen appreciating dramatically. This hurt US financial institutions using Japan as a "safe place to borrow money cheaply and use it to invest in USA or world". A shift of rate hikes, Yen appreciation, and Japan market decline basically forced financial institution borrowers to liquidate assets to have enough cash to cover the shift.
This is NOT the last major event, it is the first. Think January 2008 when US market dislocated on a Monday. Its a warning shot.
What to do? Secure assets in financial institutions that explicitly state FDIC insured up to 100K, or buy TLT ETF.
When the Fed cuts, beware of long duration bonds as I expect markets to have long term rates rise in anticipation this next round of Fed Rate cuts will be followed by even higher hikes to tame inflation again.
If you can remain financially well of, I do expect investments of a lifetime available in 2026-2030 that will be the rocket ride of a lifetime with AI bringing in profits.
Good luck!
Hello! Its been a while since I posted. I sold all my crypto a few weeks ago except my core bitcoin. I lightened up on longs (not that I had much!) a few weeks ago too.
Now the market is correcting. I will be exiting my shorter term puts between here and S&P 500 between 4,800-5,000.
I really doubt we will see a 2008 crash. I do think we will see insane swings in the market, with an overall trend down. The market is opening up insanely down today, and we could get more.
But when the S&P500 is below 5,000 its getting a little over-sold on such a short term.
In the chart below is the SPY, and we will see the 50 day moving average hit at between 4,800-5000 depending on the day in the weeks ahead.
I do expect August as a month to be DOWN, so I am not talking a meaningful bottom here.
My goal will be to roll over puts dated 2025 to 2026 and hold.
Overall, safest is 1-5 year US bonds and/or investments in core companies you think are worth it for 10 years. I do think the next 5 years will not be great for the stock market, but I do think eventually AI will be explosive. Its just a little too soon just like 2000 with the internet.
Good luck.
