In today’s briefing:
- Fear of being out replaced by fear of being in (anything but $ cash)
- Why Inflation Is A Game Changer For Portfolios
- Five Constructive Signs of a Short-Term Bottom
Fear of being out replaced by fear of being in (anything but $ cash)
- The most crowded trade in markets at the moment is $ cash.
- Fear rather than greed is dominating sentiment for both retail and professional investors and, with yields approaching 4%, cash is back as an asset class once more.
- Of course, this time last year, there was also fear driving the markets, except then it was a case of FOMO, Fear of Missing Out ; of ARKK, or Crypto, or meme stocks, or SPACs.
Why Inflation Is A Game Changer For Portfolios
- Rising inflation has played havoc with 60/40 portfolios as bond prices haven’t provided a counterweight to falling stock prices.
- A study reveals that underlying inflation trends are decelerating which should be positive to risk appetite expectations.
- We believe that the inflation and market pivot is just around the corner and it may be closer than the market expects.
Five Constructive Signs of a Short-Term Bottom
- A combination of factors are serving to signal a possible tactical bottom and put a floor on stock prices.
- Investors should recognize that the current environment has been dominated by a single macro trade, the inverse correlation of the S&P 500 with the USD.
- Should interest rate expectations rise further to boost the dollar, it would represent a significant headwind for stock prices.
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