The Week Ahead 8th Aug 22: Market Sentiment Whipsaw, Oil and Recessions, Supply Chains Easing
Hey it’s Kieran! Another week in the markets is upon us, so here are the key events to be aware of, and the most interesting Macro research coming out of the investment banks. I’ll hopefully speak to you this week in the Traderseed programs and as ever, if you have any questions, just leave me a comment below.
Wednesday’s July US inflation data will be the main highlight in the week ahead after last Friday’s much stronger-than-anticipated jobs report quashed hopes that the Federal Reserve may relent in its aggressive campaign to tame the highest inflation in decades. Any indication that inflation is still not close to peaking could test the recent rally in US stock markets.
Economists are expecting the Wednesday’s CPI figure to moderate to 8.7% in July from 9.1% in June, which was the largest increase since 1981. As ever, any surprises here will move the markets significantly.
Market Sentiment Whipsaw. Morgan Stanley’s market sentiment indicator has gone from very bearish to overshooting above the upper threshold. The index has various components all aimed at measuring the “fear” factor of the market. More and more people are talking about the end of the bear market, and are getting comfortable getting long risk assets. As the crowd gets long, this typically signals an inflection point and a possible trend reversal. Let’s see how it plays out this week.
Bear markets — the long term view. S&P500 bear markets, peak to trough, since 1927. The average decline since then has been over -37%, taking around 240 days to bottom out. This current uptrend in equities has given a different complexion to the current bear market and in comparison to years gone by, now seems rather tame.
First 6 months as the buy signal. The previous 5 “worst 6 months’ start to the year” all saw equities rally for the second half of the year…Best year saw >50% return…(admittingly in the 1930s…)
Oil and recessions — Oil always tanks during a recession, so it is not surprising to see this current sell off. The question is how deep will this one be.
Energy insiders keep on buying. Energy insiders are not concerned however, and keep on buying, and at an even more aggressive rate now in the dip.
Supply chain easing. China to US Container Freight rates continue to fall.
ARKK 2022 vs Dot Com bubble 2000. I’ve been tracking these analogues a lot recently as you know, and here is another interesting one. ARRK (Innovation Technology 2022) vs The Tech Dot Com bubble of 2000. The similarities really are remarkable. If the analogue is to play out, we can expect a trend reversal soon and the lows to be tested again soon. Buckle up!
I hope you found this interesting and useful. Make sure to follow me to get this market update every week and if you have any questions, comments or feedback, let me know in the comments below.
Have a good week!
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