Episode description
A quick & relevant update on markets for Fri, Sep 23rd
None of what you see happening right now is a buy signal.
The dollar is ripping higher. This is not good for the global economy.
Yields/rates are soaring, with a high rate-of-change.
The downside/low-end mathematical range for equity markets is dropping.
You must understand the importance of bonds and currencies in determining what's happening in equity/stock markets.
This is something you won't often hear, won't be taught by media.
Volatility is jumping higher. And, confusing the signals further, some major banks/advisory firms are under scrutiny for manipulating the VIX (a standard measure of market volatility).
When the VIX goes over about 30-32, it's a no-fly zone for trading, at least for us. The higher the VIX goes, the more trouble equity markets are going to see. This is a hard-and-fast rule baked into our process.
We can’t say this enough. The cost of capital is going up. Think of that as the cost of borrowing, of leveraging up. Whether you are a commercial real estate developer, a corporation looking to secure more funding, a hedge fund, a residential home buyer. Anything and everything that touches money is affected by this.
Inflation remains high. And the chances of more geopolitical disruption are high. Do not look for a Fed "pivot". As we said at the end of July, anyone interpreting the Fed as being dovish or stepping back from their intentions on raising rates was going to set themselves up for a fall.
12 out of 19 members of the Fed committee expect the Fed Funds Rate to be between 4.50% and 5.0% by the end of 2023.
It continue to be a crazy time for markets and risk.
Everyone talking about, waiting on, looking for a return to "normal" in our economy & markets is looking in a rear-view mirror. We are not going back to what drove markets for the last 12 years.
Equally as hopeful, intrigued, and engaged as I am short-and- intermediate-term concerned.
We're already in a different time for considering how portfolio management is carried out, overall.
And the time is developing now where an entirely different analysis of risk and approach to planning/terracing/managing cash is in play. We haven't been in a time like this in decades.
*We cannot give financial advice broadly. This message does not specify positioning. We don't know your situation. Please seek guidance if in doubt.