$2,071 – We’ve Got You in Our Sights
We’re nearing a very important milestone in the rate hike cycle, and that is the end of it.
The Federal Reserve didn’t see it coming and had to slam the brakes hard, but it locked the tires and started to spiral out of control, so it may have saved the economy from hyperinflation, but the price was a massive loss of equity that’s twice as large as the collapse of 2008, and many think there’s more to come.
Jeremy Grantham, one of the greatest money managers ever who also happens to be very seasoned as he approaches the age of 90, has warned that this was a super bubble, an “Everything Bubble,” and that it will collapse spectacularly.
This was about two years ago, and he was right, but he believes that there’s much more coming.
Today, the S&P 500 trades at about 4,000 points, and Grantham thinks that it will go all the way down to 3,000 (33% crash) in a good scenario or 2,000 points if the recession isn’t managed properly.
The S&P 500 didn’t fall to 2,000 points even at the depths of the COVID panic of March 2020, so I must say that I can’t buy into this analysis just yet.
Is it plausible? Sure, but what will cause such value destruction?
If the S&P 500 goes back to 2,000 points, it will give appreciation all the way back to the year 2014.
What do you think?
Courtesy: Incrementum AG Chartbook 2023 (Download the Book; It’s Awesome)
I am pretty sure we’ll see a recession, but I think it will likely be mild.
As you can see above, the recession indicator that never fails is signaling a recession.
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But, as opposed to many of the previous ones, the entire world has been aware of the recessionary risks for over a year, so it’s been talked about and priced into equity valuations going into this.
Therefore, I don’t buy the market crash thesis, with all due respect to Mr. Grantham.
I see stagflation, sluggish growth, and gold surging!
Courtesy: Incrementum AG Chartbook 2023
Gold is seeing through the bullshit.
The bond traders currently see the FED cutting rates in July and continuing to gradually cut them into December, but historically speaking, rates are remaining steady at around 4.00%.
What this means is that stocks aren’t cheap, and if they aren’t attractively priced in a world that is seeing declining USD demand, gold is set to explode above $2,071 – and it might even happen in 2023.
A couple of days ago, I did the ultimate test to see if the bear market is over.
It’s a real-world test, and you may not agree with it, but it speaks volumes to me.
I asked my personal trainer if he wanted me to introduce him to a real estate fund that now offers a 12% yield on debt. He said that it sounds good, but he thinks he can do better in the stock market.
If a gym instructor rejects a guaranteed 12% income stream to speculate on equities, better than the rate of return of most hedge funds, you know the bear market isn’t over.
There is no desperation yet.
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