Vanilla XJO Thread, page-650

Another correction this year?

More here about astro-enterology. Yes, it's a real thing. I changed its name to disguise it.

It is not actually about astrology. Without going into any details about what its basis is, I can say that astro-enterology has a good track record of predictions. Astro-enterology had predicted that there would be a major correction in 2025. This was a once-in-several-years prediction.

The correction earlier this year could have been the correction predicted by astro-enterology. For the XJO, the correction began in mid-February, went down by 15% over two months and then recovered for two months. By mid-June the XJO had recovered back to where it had been before the start of the correction. A 15% fall is definitely a correction. Four months from beginning to end is definitely a correction. Corrections of that magnitude don't happen often, although 15% is not particularly high on the Richter scale of market crashes.

Done and dusted? Perhaps not. Although the prediction did not specify precisely when within 2025 the correction would begin, it had seemed more likely that it would happen in the later part of the year rather than in the earlier part. This means that, according to astro-enterology, there could well be another correction later this year. If not, then markets are now trending higher for longer, basking in the warm glow of the Trump era.

Looking at the fundamentals, there are no prizes for guessing that the biggest factor in favour of there being another correction later this year is Trump. On the one hand, his isolationist economics and threats to other countries are disruptive to markets. On the other hand, markets seem to gradually be becoming immune to his activities. As was evidenced recently by the Israel-Iran war, it would take a much bigger war than that to crash the markets. There are of course factors other than Trump that could trigger a correction, for example natural disasters. Apart from a once-in-a-million-years major asteroid impact, most natural disasters cause no more than a blip in the markets. So, whether or not another correction happens later this year seems to depend mainly, if not entirely, on how much new disruption Trump manages to create.

According to astro-enterology, after the middle of 2026 there is little chance of another major correction for the next four or five years. This could correspond either with Trump settling down and causing no further major disruptions for the remainder of his term, or it could correspond with markets putting Trump on ignore and shrugging off each new absurdity.

All this astro-enterology mumbo-jumbo provides no certainty about anything just yet. But it does provide some scope for making big picture contingency plans. For the next six months, if a new correction appears to be starting, then I will assume that it is going to be quite big on the Richter scale. In the meantime, it seems prudent to be long rather than short.