In recent weeks and months, we consistently hear professionals tell you on the one hand that the markets are inevitably going lower, but on the other hand continue to push stocks. They continue to tell you to stay invested. They are invested themselves. And, in many cases (mutual fund managers, and others who are required to keep a certain amount invested), they do as they preach. Why? If I know something is going to go lower, why am I buying it or holding it now?
I realize it is often hard to sell your stocks that you have held for so long. And I do realize that if you stay invested for 10 or 20 years, you will undoubtedly make money. But what if you could make money when stocks are going down as well as up? What if you could double your returns?
Pie in the sky, of course. Who can do that consistently? Probably no one. But, at a minimum, you can limit your losses. The macro narrative will rule the markets for some time, and you will have the opportunity to buy almost every stock lower over the next few months. The Fed must maintain the course, or they will lose all credibility.
Bear Market Duration
Please keep in mind, in March of 2000, the Nasdaq peaked. Stocks didn’t bottom until September of 2002 – 30 months! In October 2007, stocks peaked again. They did not bottom until March of 2009 (“only” 17 months). And you will hear people say, sure but those were extremes with financial issues all layered in. To which I would reply, sure, but this is the biggest asset bubble in the history of the world, with the fed balance sheet doubling its previous high. Trillions of dollars’ worth of currency have been created out of thin air by central banks globally in only two years.
I don’t see how this market pushes meaningfully higher in the coming months. Certainly not until we have a realistic horizon on peak rates. As of now, visibility is 0. Until capitulation, there are three recommendations: money markets, short-term high-quality bonds and outright short. You will have opportunities to buy everything lower.
If you don’t want to follow the markets, stay in short term assets. If you can afford to be active, my September recommendations still hold – stick with the leveraged short ETFs. But be ready to get out on dramatic down days when the RSI gets to around 30.