Stocks fell slightly last week, interrupting the bear market rally that had started in the second half of May.
www.ft.com/content/d333a376-f445-4530-a595-49e45ff300bc
We hold a risk-on portfolio at the moment because:
1. The market has already incorporated an economic slowdown into prices.
2. The $SPX500 is trading clearly below its 50-day moving average.
3. Investor sentiment is pessimistic and positioning low.
4. The media narrative appears negative, with more focus on the possible downside than upside.
5. Investor flows into equities have reversed, with large inflows seen last week.
6. China is re-opening its economy.
www.ft.com/content/4515ef0a-b9be-4598-98bc-f45b6100c70a
This positive tactical outlook does not change our view that sooner or later, the Fed will have to raise interest rates aggressively to bring inflation back under control, which we expect will lead to further losses for stocks in late 2022 or 2023.
But this may not be a straightforward or quick process. As Ruchir Sharma notes in the FT: โMarkets do not move in straight lines, and it takes time for entrenched investor psychology to break. Though many institutional investors have cut stock holdings, retail investors have barely flinched so far.โ
www.ft.com/content/53c7a5a4-e183-493c-8d62-be0c79123f24
Many still remember the good days of 2020 and 2021 and hold onto their stocks. It may take more economic pain and market losses for investors to give up on stocks, which would then create the right conditions for the next bull market to start, perhaps sometime in 2023.
๐ฎ๐ฌ๐ฎ๐ฎ ๐ฝ๐ฒ๐ฟ๐ณ๐ผ๐ฟ๐บ๐ฎ๐ป๐ฐ๐ฒ ๐ฌ๐ง๐
@triangulacapital +3.1%
$SWDA.L -13.2%
๐ฃ๐ผ๐ฟ๐๐ณ๐ผ๐น๐ถ๐ผ ๐ฐ๐ต๐ฎ๐ป๐ด๐ฒ๐
$BAYN.DE (Bayer AG) and $EQR (Equity Residential) were replaced by $ADS.DE (Adidas AG) and $KER.PA (Kering SA), in part because the latter two benefit from Chinaโs re-opening.
