...I doubt the 2024 strong start to the US market helped...

...I doubt the 2024 strong start to the US market helped enriched many market participants who bought shares this year.

...If it didn't, then an eventual sustained US market correction would only exacerbate the pain.

...the last time big money could be made was in the gold trade of 2020-21 and lithium trade of 2021-22, coal & oil trade in 2022 and uranium trade in 2023. 2024 was favourable for Gold but not in a comprehensive way for gold stocks. I think 2025 will be one for precious metals again.

...the XJO only gained +11.68% todate from the day just before the Covid crash 4.5 years ago on 17 Feb 2020. Almost 5 years prior to the 2020 crash, XGD had suffered a -19.5% correction from 23 March 2015 to Feb 2016. And 5 years before that, XGD also suffered -21.1% bear market from Apr 2010 to mid Sept 2011.

...IMO 5 years from Covid crash date is 17 Feb 2025 and that could be about the time XGD would suffer its next bear market of >-20-30% loss to 5,500-5,800 range, if it does not happen sooner. If that were to occur, anyone who would have bought the XGD index in early 2015 would have had zero gains in a decade long hold.
The market sell-off was crazy, but so is what’s happened since

The biggest market panic since the pandemic seems to have come and gone. But don’t believe the calm – this is a fragile market.
Aug 19, 2024 – 10.21am


Did the biggest market panic since the pandemic really happen? Two weeks later, it’s hard to see the evidence.
Wall Street ended last week on an impressive winning streak that has erased the losses from the brief sell-off. The ASX 200 is once again knocking on the door of 8000 points, after being buoyed by a strong start to the August profit season.

Beneath the apparent market calm are some big potential risks.  David Rowe
But if you are wondering what the hell it was all about, you’re not alone. Market guru James Aitken of Aitken Advisors sums it up nicely.

“The determination to add risk after the big wobble has been astonishing to watch: it’s almost as if the wobble in everything from the Nikkei to momentum stocks never happened,” he wrote over the weekend.

“Could this rebound be driven by qualitative, fundamental investors? Bargain hunters aside, I doubt it.”


What explains the snapback? As with the causes for the brief rout, there are several candidates.

Recession fears in the US have eased after some strong data points last week, including better-than-expected retail sales and job openings.

Some of the more popular and leveraged trades in global markets (including the now big Yen carry trade) have been reduced, although not completely washed out.

And, just as the mini-crash was compounded by algorithmic and momentum trading, so too has the rebound. Or as Aitken put it: “The best explanation I have heard for this remarkable snap back is: ‘The computers want their stocks back.’”

Nick Ferres, chief investment officer at macro fund Vantage Point Asset Management, sees some fuzzy logic in the market’s moves.

While the stronger economic data last week helped push rates higher, it was not consistent with the emergency rate cuts that investors had been expecting. Indeed, the chances of a 0.5 per cent rate cut by the Federal Reserve next month have been all but extinguished by money markets.

“This [rally] will be something to fade over the coming weeks. The rapid and emotional nature of the price action over the past few weeks is not a sign of a healthy market.”

Ferres, who spent months correctly warning of stretched positioning and vulnerabilities in the lead-up to the sell-off, says the fact that US unemployment has risen 0.9 per cent from its lows represents an important marker for investors: the US economy is slowing, rate cuts are coming and markets now need to fight against history.

Soft landings, he points out, are exceedingly rare: of the 12 major downturns since 1957, just two (1966 and 1995) delivered this Goldilocks outcome.

Investors also need to be careful what they wish for on rate cuts; the start of a cutting cycle has historically arrived just before the start of a recession and a market correction.

“In the first 200 days following the first cut, equities typically decline by 23 per cent on average. The start of the rate cycle signals the beginning of a deterioration in growth and profits,” Ferres says.

There are plenty of other things for investors to remain watchful about, too.

The scepticism around the artificial intelligence stocks that dominate global indices hasn’t gone away, even if the likes of Nvidia and Microsoft have recouped their losses.

Tech analyst Benedict Evans published some fascinating analysis showing ChatGPT usage has stalled, even as the capital expenditure of tech giants moves higher, and earnings plateau.

“Hundreds of millions of people have tried ChatGPT, but most of them haven’t been back. Every big company has done a pilot, but far fewer are in deployment,” Evans says.

The impressive surge in Kamala Harris’ popularity makes the best possible US election outcome – that is, the Democrats and Republicans sharing power across the White House, Congress and the Senate – more likely. But it also increases the possibility of the worst outcome: a contested or inconclusive result.

And for local investors, China’s spluttering economy – and the pressure it’s putting on commodity prices – remains a real worry.

But the biggest issue today is the same as it was before the rout: positioning. The equity market rebound means valuations are once again elevated, and the equity risk premium (the difference between earnings yield and risk-free bond yields) is back to about 1 per cent, compared to the long-run average of about 4 per cent.

Just a week after the panic, investors are again convinced of a soft landing. They are positioned for both rate cuts (which requires a weak economy) and strong earnings growth (which requires a booming economy). They fervently believe the AI story can run on.

If we get another challenge to any of these beliefs, or if any of the risks described above become more prominent, then we could see investors flee crowded positions once again.

Don’t believe the calm on the surface. This is a fragile market.