Wednesday, October 5, 2022

Stock Market Snapshot (video)

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Attention Non-Client subscribers: Nothing in this video should be construed as investment advice. The examples expressed relate to portfolio management we perform on behalf of our clients, and, again, under no circumstances are they to be considered recommendations to the viewer.


  1. 100% agree with your technical analysis! The market is very fluid and can change at any minute. I still like your 3500 target for S&P. Some politicians are getting nervous of the credit market. They know that they need the liquidity, to support their spending, from investors who buy government bonds. This is what I read from CNN business article today: "Now, economists are noting a fundamental and worrisome imbalance in the bond market. There are trillions of dollars worth of bonds for sale, they say, but a growing scarcity of buyers. If this trend persists, it could lead to credit problems and inhibit the US government’s ability to fund itself. That’s particularly concerning after America’s national debt climbed north of $31 trillion for the first time on Monday."

    I don't believe that we will see anything like 2008. What is your opinion?

    ADP numbers don't support the theory that the Fed will ease rate hike anytime soon. Therefore, the darkness dark is not yet here in my opinion.

    1. Thanks Sam... What you're reading about of course is showing in treasury yields... Like anything else when supply (those "trillions") exceeds normal demand, the price drops... In the case of bonds when the price drops, the yield rises. As the yields become more attractive, and they themselves become a headwind for the economy, the demand begins to grow, and ultimately the price rises and yields decline... The economists are no doubt referring to the government spending to come, requiring more and more bond issuance... Question being, will there be the demand... You can rest assured that there will be buyers for US treasuries, the question is, always, at what cost? We saw a perfect example of your concerns coming to fruition last week, when yields on UK gilts spiked, placing Britain's heavily-leveraged pension system is serious jeopardy... And what happened? The Bank of England rushed in and started buying like mad, prices immediately rose and yields came back down to earth... Now, will they have to keep doing that? Well, you would think, but think about the message to the market the next time gilt's begin to crack... Private investors will absolutely know that the BoE will rush in... They'll want to get in front of that and capture those cheap prices (high yields) ahead of the BoE... And, as a result, they end of doing the heavily lifting the next time around... That's exactly what happened in 2020 when the Fed jumped into the junk bond market... They only had to buy 17 billion worth... the hedge funds and private equity firms ended up picking up the slack, a no-brainer money-maker for them once they knew the Fed was there...

      Make no mistake, if, by chance, the US treasuries begin to crack, the Fed will rush to the rescue! Recall the elevated "Move Index" and "Treasury Liquidity Index" that I've shared in recent videos... Those do illustrate heightened risk in US credit markets...

      Interestingly, ADP doesn't always correlate well with the BLS numbers (due this Friday)... I don't have a prediction on this one...