Anyone else thinks this market is living in a fairy tale?
I would first point out something many people wrongly believe: there's no bear market, there hasn't been any bear market yet. Look at the dotcom and GFC period, of XJO, UK100, CAC 40, and other European indices. 2022 was simply a correction, nothing more.
At the peak in 2021, S&P is 35% weight in the heaviest tech stocks iirc, whereas the indices above have very light tech weighting. The easy monetary environment since 2009 has pushed earnings and p/e of these tech stocks to the moon, and after covid the fed went on steroids. The parabolic run of nasdaq since 2009 is mostly due to this, and a reversal of the monetary policy has had immediate effect on top & bottom line of these tech stocks. Nasdaq had a "technical" bear market in 2022, but it was mostly due to multiples compression. Earnings estimate have barely come down. Everyone in the news keep talking about "bear market", when it's the tech sector pushing down the S&P. The bull market is very much intact in sectors other than tech and real estate, excluding these area S&P is simply in a correction for 2022.
Historically markets have went up during rate hike cycles, but this time the bubble got so big that as soon as the fed talked about hiking rates in Jan 2021, a correction ensued. Market right now thinks soft landing is guaranteed because the employment data is strong and inflation is rapidly dropping, and earnings will grow strongly again and fed will "pivot" and return to the post covid monetary policy of 0% rates and QE infinity, despite a lot of the earnings growth since covid was precisely due to easy monetary policy + inflation. Ironically, earnings, especially for the heaviest tech stocks, will come down with inflation.
History has shown the fed pivots right after the bear market begins, for obvious reasons. Fed will stimulate again when the shit hits the fan, but they aren't going to do it like before. Inflation is caused structural problems in supply, labor, oil, commodities, plus de-globalization and reshoring, and because of this the fed will not stimulate unless the economy is collapsing, and the won't stimulate once the economy recovers from the upcoming recession.
If you're rational and not a permabull, do you really think the all clear is here? Stonks going to the moon? Since 1982, inflation and bond yields have steadily dropped, making a capitulation in 2020, and debt has soared to unimaginable levels. The period from 2009 to end of 2021 was highly abnormal, resulting in "stonks only go up" during this period, yet most investor think this period is normal. The current micro is normal, 3.5% US 10 year has been normal historically, fed funds 3%+ is normal, but liquidity is still high and needs a ways to drop before it becomes normal. I believe this 40 year bull market (since where rates topped in 1982) has ended, inflation and bond yields will be structurally higher, and this debt bubble will become an important discussion going forward. S&P is very overvalued by historical measures (shiller p/e, market cap to GDP, etc). I don't know what will happen in the next 10 years, but I'm almost certain it won't be like the one way bull market from 2009 to end of 2021
TLDR; the bear market hasn't even begun yet.
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