Gotta come at ya one more time today... And, please, do not construe this as a "take it to the bank" message.
Listening right now to the Market Huddle podcast, and I hear the featured guest (Paul Krake, founder of institutional research firm View From the Peak) make a statement that echoes what I've been suggesting of late about the present (very out of consensus) upside risk to stocks during Q4.
Here you go:
"Let's call it a 10-week window."
"We are 1 weak data point away from one of the greatest squeezes we have seen in years... If you get a weak inflation print next Wednesday*, S&P finishes the year at 4400**."
"Let's put it this way, we've got about 37 clients who we deal with at View From the Peak, every single one of them is either short, underweight, underexposed or underleveraged."
Host Kevin Muir chimes in:
"Yeah, I went to New York last week, I spoke to people, every single one of them, there was nobody, you're the first person I've met who is willing to say out loud that there might be some right tale risk***."
Then Paul goes on to describe how the market is geared to .75% rate hikes and continued rising inflation going forward... But that inflation has actually already peaked and if/when it gathers some downside speed, the reality of recession in Q1 2023, and easy monetary policy thereafter, is something markets will begin to sniff that out as weak data points emerge... And he then reminds of the hugely positive Q4 seasonality (a topic we've broached herein of late as well).
Now, to be clear, I'm not making a call on next week's CPI report, and our base case remains lower levels for the present bear market... I'm simply stating (as I have in recent videos) that, for example, a cooler than expected inflation reading will likely spark a not-small rally, coming off of these very weak sentiment readings, and into what is a historically very bullish season for stocks.
Stay tuned...
*Next Thursday actually...
**That's a 21% rally from here...
***Kevin doesn't read our blog...
Wow! I always wonder when will that day come. The upside is very attractive, but I remain cautious. Even at this price level, the return within a 12-month period is quite positive.
ReplyDeleteLOL. If I were to have a crystal ball of the future, I would load up my truck and buy everything from Wall Street. :)
Yeah, like I said Sam, not really making a call, just always assessing probabilities, short, and, more importantly, long-term... Just trying to help clients gauge their expectations... Folks watch the market daily like never before... If we do get that bounce, I'll likely be putting it into perspective (calling it for what it remains for now), a bear market bounce... They can be violent to the upside coming off of such low sentiment, positioning, etc... Calling them "bear market bounces" suggests there's ultimately more work to be done to the downside... But always have to stay very openminded, and NEVER wedded to our theses...
DeleteGot It! Thanks!
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