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MULTIBAGGER Series - Stock 3Hello everyone! I am back with 3rd company of the multibagger series. The company is Zaggle Prepaid Ocean Services Ltd. Zaggle builds world-class financial solutions and products to manage the business expenses of corporates, SMEs, & Startups through automated and innovative workflows. It is at an intersection of SaaS (Software as a service) and Fintech. It has made strategic alliances with many other companies. The company has an esteemed list of corporates like Tata Capital, Inox, NSDL, DBMS, Wockhardt, Yes Bank, Greenply, etc. It has also made an agreement with VISA and the deal is valued at approximately $20 million over the next five year. The company has shown more than 10x growth in both sales and profit made in the past 4 years. Last year sales was 776 cr and profit was 44 cr. The quarterly sales and profit is also continuously increasing and the company is expected to grow at a good pace from here. They have made visionary targets for the year 2025. Ace investor Ashish Kacholia has also invested in this company. Investing in such companies will make our portfolio diverse and as they are smallcap company, chance of giving multibagger returns are more from such companies. Investing in such companies bring a high risk factor so please do your own analysis before investing. Hope you learned something new from this post. Do like, share and follow me. Thank you!
NSE:ZAGGLELong
by ronak16125
Visa (V): Chart Analysis Update We hope you remember our previous analysis on Visa. The price reacted to our target area and has since increased following the latest drop. We now believe that Wave ((iv)) is complete and that we are currently in Wave ((v)). A level around $305 or even slightly higher should be possible for Visa before breaking the current local low at $253. Once this Wave ((v)) is complete, concluding the overarching Wave 3, we plan to send out a limit for new entries.
NYSE:VLong
by freeguy_by_wmc
AXP, THE PLATINUM CARD ISN'T ACTUALLY PLATINUMTrends and price targets marked. Things are overextended Potential to bounce back and catch more upside even with the overextension. Guideline is more for backtracking, but it could potentially look something like this. Follow trends and price targets rather than guideline, it is more to get an idea of what things could look like. 247 or so looks like a top to me especially with the trend formation I would suggest watching a break on the lowest green support trend and I would also suggest watching a rejection on the rejection trend. Should we break out of rejection trend, probably 360. Drop will be steep, but the most natural path would be the 247 drop to 80. I would say, if you're looking to enter, wait and be patient. If there is more upside, you're not missing much. If downside is coming, there are still trend support lines that can see bounces in price, meaning, you'll likely be able to find a better entry that allows for less risk.
NYSE:AXP
by nicktussing77
1
JPM, SOME UPSIDE AND A WHOLE LOTTA DOWNSIDEJPM might have a bad week? Maybe bad Feb? idk yet, however, from technicals, it seems like after 181 or so, and especially after $210, there isn't much upside showing. Likely meaning, the risk far outweighs the reward at those levels. IT could be big, and it could be fairly quick. if you're shorting, yeah, these are great times to consider entering. The downside shows all the way to $69 (nice) Does that mean enter short right now this minute? nah but be ready because things could really drop quickly in the coming month or so. idk maybe this?
NYSE:JPM
by nicktussing77
SLOOS Banking Lending Conditions- Released Monday 5th Feb 2024 Please review my prior post for a more detailed breakdown Released quarterly, the Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) is a survey of up to 80 large domestic banks and 24 branches of international banks to gain insight into credit, lending and bank practices. The Federal Reserve issues and collates the voluntary surveys. The surveys generally include 25 questions and a number of special questions about development in banking practices. They cover practices for the previous three months, but also deal with expectations for the coming quarter and year. While some queries are quantitative, most are qualitative. The surveys have come to cover increasingly timely topics, for example, providing the Fed with insight into bank forbearance policies and trends in response to the 2020 economic crisis. Let’s have a look at the culmination of the some of the more important data in chart form The Chart The blue line on the chart plots the results of the SLOOS survey – specifically, the net percentage of polled banks reporting that they’ve tightened their lending standards to commercial and industrial customers. The other lines are specified on the chart and are self explanatory . PUKA
FRED:DRTSCILM
by PukaCharts
MACRO MONDAY 32~The SLOOS~ Is Lending Increasing or decreasing?MACRO MONDAY 32 – The SLOOS Released Monday 5th Feb 2024 (for Q4 2023) Released quarterly, the Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) is a survey of up to 80 large domestic banks and 24 branches of international banks to gain insight into credit, lending standards and bank practices. The Federal Reserve issues and collates these voluntary surveys. The surveys generally include 25 questions and a number of special questions about development in banking practices. They cover practices for the previous three months, but also deal with expectations for the coming quarter and year. While some queries are quantitative, most are qualitative. The surveys have come to cover increasingly timely topics, for example, providing the Fed with insight into bank forbearance policies and trends in response to the 2020 economic crisis. Let’s have a look at the culmination of the some of the more important data from the SLOOS in chart form The Chart The blue line on the chart plots the results of the SLOOS survey – specifically, the net percentage of polled banks reporting that they’ve tightened their lending standards to commercial and industrial customers. I have combined the SLOOS Tightening Lending Standards on the chart with the Unemployment Rate. You can clearly see a pattern of the SLOOS leading the Unemployment Rate and also the broad correlation of their trends. Recessions are in grey. The SLOOS Tightening Lending Standards (blue line) ▫️ Lending standards tightened significantly prior to the onset of each of the last three recessions (See green lines and text on chart). ▫️ When lending conditions tightened by 54% or greater it coincided with the last four recessions. (Represented by the horizontal red dashed line on the chart and the red area at the top) ▫️ On two occasions the 54% level being breached would have been a pre-recession warning; prior to the 1990 recession and 2000 recession providing approx. 3 months advance warning. ▫️ When we breached the c.34% level in Jan 2008 it marked the beginning of that recession. We are currently at 33.9% (for Q3 2023) and were as high as 50% in the reading released in July (for Q2 2023). Above the 34% on the chart is the orange area, an area of increased recession risk but not guaranteed recession. ▫️ Interestingly, every recession ended close to when we exited back out below the 34% level. This makes the 34% level an incredibly useful level to watch for tomorrows release. If we break below the 34% level it would be a very good sign. We could speculate that it could be a sign of a soft landing being more probable and could suggest a soft recessionary period has already come and gone (based solely on this chart continuing on a downward trajectory under 34%). I emphasize “speculate”. U.S. Unemployment Rate (Red Line) ▫️ I have included the U.S. Unemployment Rate in red as in the last three recessions you can see that the unemployment rate took a sudden turn up, just before recession. This is a real trigger warning for recession on the chart. Whilst we have had an uptick in recent months, it has not been to the same degree as these prior warning signals. These prior stark increases were an increases of approx. 0.8% over two to three quarters. Our current increase is not even half of this (3.4% to 3.7% from Jan 2023 to present, a 0.3% increase over 1 year). If we rise up to 4.2% or higher we can start getting a little concerned. ▫️ The Unemployment Rate either based or rose above 4.3% prior to the last three recessions onset. This is another important level to watch in conjunction with the 34% and 54% levels on the SLOOS. All these levels increase or decrease the probability of recession and should infer a more or less risk reductive strategy for markets. In the above we covered the Net percentage of Banks Tightening Standards for Commercial and Industrial Loans to Large and mid-sized firms. The SLOOS provides a similar chart dataset for Tightening Standards for Small Firms, and another similar dataset for Consumer Loans and Credit Cards. I will share a chart in the comments that illustrates all three so that tomorrow we can update you with the new data released for all of them. You are now also better equipped to make your own judgement call based on the history and levels represented in the above chart, all of which is only a guide. Remember all these charts are available on TradingView and you can press play and update yourself as to where we are in terms of zones or levels breached on the charts. Thanks for coming along again PUKA
FRED:DRTSCILM
by PukaCharts
The Bond Market is Pricing in a Collapse of The Yen Carry TradeThe spread between the US10Y and JP10Y has historically been a great leading indicator of contraction within the Yen Carry Trade and likely will be into the future. If we were to apply TA to it, we can see that the spread appears to be Double Topping and has formed a Bearish Shark at this top as the RSI breaks down and the MACD Diverges. If we are to take this as a warning, then we should expect this spread to go down significantly, and that would be accompanied by the contraction of the Carry Trade, leading to lower liquidity and signfiicantly tighter credit conditions and ultimately a depreciation in market pricing. I think we could see JPY and USD strength during this time but would avoid other currencies.
TVC:US10YShort
by RizeSenpai
2
USD vs Foreign Currency Sets Up Black Swan/Credit Event 2028-29USD vs Foreign Currency Sets Up Black Swan/Credit Event – Pay Attention This video will show why the US stock market continues to rally and the US Dollar continues to strengthen. It is all related to what is happening in China/Asia and much of the world. The cheap US interest rates over the past 4+ years have allowed foreign borrowers to take advantage of localized demand for capital and the “Dollar Carry Trade.” When you can borrow USD for 2.5%, convert the USD capital into localized currencies, and use that capital to earn 20% or more – it’s easy to borrow as much as you can to make the extra 18% - right? As long as there is no disruption in currency valuation levels and/or economic activities, it seems like a simple process for profits. But when localized currencies collapse against the US Dollar, this sets up a very dangerous waterfall event. Now, the profitable USD carry trade is upside down from the start. It takes 25~35% more localized currency to repay the USD debt. Additionally, consider that the performance of these borrowed funds may also be upside down related to profits. If the localized economy collapses and consumers are not buying, now you have additional downside pressure related to economic performance. This is why the rush into USD-based assets and equities continues. The rally we see in the US indexes/stocks is almost “in the face” of the US Fed raising interest rates while trying to weaken inflation. It is almost as if the US Fed has acted in a predatory manner by raising interest rates – yet failed to understand the dynamics of the global markets. The result will be a Black Swan type of credit event. Buckle up and prepare for it. Follow my research and prepare for the biggest opportunity of your lifetime.
COMEX:SI1!Long
by BradMatheny
Higher for LongerUS inflation data in July 2023 provided mixed signals. While Consumer Price Index (CPI) is moving in the right direction, producer price inflation suggest pipeline pressures are picking up. Core CPI, which excludes often-volatile food and energy costs, rose only 0.2% for a second month in a row . However, US producer prices picked up in July, owing to increases in certain service categories. This likely buys more time for the Federal Reserve (Fed) to deliberate on the future path of monetary policy. The flows into bond exchange traded funds (ETFs) have been volatile. Over the past year, investors were starting to embrace duration. Investors were positioned for recession, inflation crash, and Fed cuts - evident from $31.7bn inflows to Treasury bond ETFs on pace for a record year2. However, investors are starting to pull out of the biggest bond ETFs devoted to Treasuries. More than $1.8 billion came out of the $39 billion iShares 20+ Year Treasury Bond ETF last week, the most since March 20203. Sentiment toward long-dated Treasuries has soured over the past month amid growing conviction that the Fed will keep interest rates at elevated levels for an extended period. We expect rates to remain higher for longer and are unlikely to see the Fed cut rates until the Q1 of next year amidst a stronger US economy. Don’t celebrate on disinflation just yet Overall, the US economy continues to show extraordinary resilience despite monetary constraints and credit tightening. While inflation has shown encouraging signs of decline, we caution that the level remains high. Strong July retail sales raise the risk of a re-acceleration in inflation. The four biggest categories of the ex-auto’s component saw outsized gains: non-store retailers, restaurants & bars, groceries, and general merchandise. Amidst a tight US labour market, with unemployment at historic lows and wages continuing to rise, the downward pricing momentum in the service sector is likely to be at a slower rate. Commodity prices are also beginning to rebound from the weakness seen in Q2 2023. Energy prices have been rising on the back of Organisation of Petroleum Exporting Countries and its allies (OPEC+) production cuts. If commodity prices extend their recent momentum, it could pose upside risks to inflation. Fed Officials remain divided Messaging on a somewhat mixed inflation outlook from the Fed Officials remains a mixed bag. One faction remains of the view that rates hikes over the past year and a half has done its job while another group contends that pausing too soon could risk inflation re-accelerating. Fed governor’s Michelle Bowman and Christopher Waller remain in the hawkish camp, hinting at more rate increases being needed to get inflation on a path down to the 2% target. Futures markets are assigning about a 11% chance of a 25-basis-point rate hike when the Fed next meets on 19 and 20 September4. Additionally, rate cuts have now been completely taken off the table until perhaps later in the Q1 2024. The latest Fed minutes reveal commentary from officials, including the hawks, such as Neel Kashkari, suggest a willingness to pause again in September, but to leave the door open for further hikes at the upcoming meetings5. Opportunity for a yield seeking investor It’s been an impressive turnaround since the pandemic when negative real yields became the norm. TINA- ‘There Is No Alternative’ to equities, is over now that evidence of the shift to a 5% world appears stronger than ever. Today investors have the opportunity to lock in one of the highest yields in decades, with US two-year yields paying close to 5% exceeding the yields at longer maturities without the volatility witnessed in the 10-year sector. A resilient US economy is likely to keep interest rates and bond yields higher for longer. Sources 1 Bureau of Labour Statistics as of 10 July 2023 2 BofA ETF Research, Bloomberg as of 9 August 2022 - 9 August 2023 3 Bloomberg as of 14 August 2023 4 Bloomberg as of 17 August 2023 5 federalreserve.gov as of 16 August 2023 This material is prepared by WisdomTree and its affiliates and is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date of production and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and non-proprietary sources. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by WisdomTree, nor any affiliate, nor any of their officers, employees or agents. Reliance upon information in this material is at the sole discretion of the reader. Past performance is not a reliable indicator of future performance.
FRED:FEDFUNDS
by aneekaguptaWTE
Intervention - Fatal Flaw in Capital Markets?In the news today is the Japanese Yen, as it approaches critical resistance at the 146 level. The market has steadily been making new highs on the daily level this year, having just exceeded the July high. As seen in the chart above the market has moved quickly through levels of resistance, now breaking a downtrend line from the major Oct 22' high. See below a quarterly chart, the Yen is making new highs at significant timescales, possibly threatening a breakout as the historical ceiling is much higher than the modern perception might lead one to believe. The need for intervention around the current price level has become a concern for the global investment community, since in September and October the Bank of Japan proceeded with heavy selling of US Dollars to support their currency at the 145 level. This was last reached in 1998, at the height of the infamous Nikkei bubble as equity market growth produced historic inflation. However there was no need, or thought for intervention then which begs the question of why it is seen as a necessity now. This is largely due to the degradation of credit markets around the globe, and the inability of central banks to produce productive inflation, meaning real economic growth. In 1998 the yield for a 10 year bond was around 2%, whereas outside the US negative interest rates have become common. See below as the yield for 10-year Japanese Government bonds has pushed against, and exceeded the imposed 'ceiling' since moving from negative interest rates. The attempts by central banks to "stimulate" investment by lowering bond yields has in fact had the opposite effect, since investors will naturally seek the highest return on investment . In the modern economyc, bonds and government credit are treated as cash, so as central banks buy sovereign debt they are absorbing and concentrating capital which historically has circulated globally across currency and asset classes. This has the effect of domestically creating deflation, as capital is less free to circulate, but internationally will create inflation as (in this case) investors are not buying Yen-denominated debt , leading to the Yen losing strength in FX-markets. So the level at which intervention is required to support currencies is slowly being drawn lower, as the Bank of Japan burns the candle at both ends. It is NOT possible in globalised, open markets to engage in both bond market and FX market intervention as one or the other must reflect the degradation of economic conditions. This issue cannot be resolved domestically as international capital dictates growth, and lowering yields is not a means to attract investment. The Bank of Japan has resolved to loosen control on bond markets, by allowing 10- year yields to settle on a market-determined fair price. However, price discovery has not been a relevant dynamic in credit markets for nearly 30 years. With FX already at critical levels, it is important to be wary of volatility as capital flows shift with respect to war, credit and equity bubbles around the world and so on. Europe and China, among others should also be under the radar for engaging in this flawed logic without international support for their currency. So long as the United States, backed by foreign reserves of US dollars, pushes the bill on interest rates this intense pressure will continue to be reflected in global financial markets.
Long
by FPS_Denny
2
Increasing The DXY Profit Target to $154 From $103The DXY after catching a rally off a 4-Hour Bullish Butterfly, has reached my price target of $103, and if it gets above that zone, then I think the DXY will have plenty of room to make multi-decade highs due to The High Interest Rates, Tightening Credit Conditions, and The Deflation that is now being priced into the US Bond Market. If things go as expected beyond the $103 zone, we will likely have entered into a Harmonic Wave Structure that should take us up to the Macro 0.886 Fibonacci Retrace which sits all the way up at $154 The RSI and PPO are both sitting at the mid point which is an area where it can often go just to reset before making higher highs in price.
TVC:DXYLong
by RizeSenpai
Consumer Credit: Harmonically Set Up to Return Down To TrendConsumer Credit has recently risen to over $1 Trillion and this rise happens to align with a 2.618 Fibonacci Extension and the PCZ of a Bearish ABCD. If we view this based on the expectations of Harmonics and Fibonacci, we would expect that this is indeed the top and that we will now begin a retrace back down to trend, which could likely land us between the 50% and 61.8% retrace down at $600–$500 Billion as those retraces line up with the trend line we have formed.
FRED:CCLACBW027SBOGShort
by RizeSenpai
🟨 RECESSION? - TIGHTER CREDIT CONDITIONSFED CHAIRMAN POWELL'S STATEMENT 🎙️ Chairman Powell remains flexible regarding future rate hikes, emphasizing that decisions will be taken on a meeting-by-meeting basis. Notably, the removal of the word "anticipates" indicates a decrease in urgency for additional rate increases. Furthermore, the absence of the phrase "sufficiently restrictive" suggests that current policy has reached the desired level. LENDING AND CREDIT CONDITIONS 💳 The Federal Reserve is closely monitoring lending and credit conditions as tighter credit may replace some of the rate hikes that could have been necessary. The current approach can be described as a "hope and pray" policy, where the Fed relies on falling inflation and tighter credit conditions to achieve a sufficiently restrictive stance, while hoping no other issues arise. POTENTIAL RECESSION ON THE HORIZON? 📉 Tighter credit conditions might lead to a recession. However, it is essential to determine how much of this possibility has already been factored into the market.
FRED:DRTSCILMShort
by TintinTrading
Quality is back in focus, amidst the banking turmoilHistory never repeats itself, but it often does rhyme. The recent collapse of Silicon Valley Bank (SVB) and Signature Bank in the US and the forced takeover of Credit Suisse by rival UBS have triggered concerns of contagion across the global financial system. The current stress in the banking sector is reminiscent of the 2008 financial crisis. However, unlike the 2008 financial crisis, uncertainty is not centred on the quality of assets on bank balance sheets but instead on the potential for deposit flight. Tough ride for Banks ahead US regional banks have witnessed significant deposit outflows which, combined with unrealised losses on their security holdings, have seen banks consuming their liquid assets as a very fast pace. In turn, sentiment towards European banks has deteriorated. This is evident in the widening of debt risk premia, making it more expensive for banks to fund their operations. It’s important to note that banks were already tightening lending standards prior to recent events. So, lending conditions are likely to tighten further as deposits shrink at small and regional US banks and regulators respond to the new risk environment. The turn of events in the banking sector have led to higher uncertainty which is likely to be reflected in higher volatility in credit markets. So far, the impact on other sectors has been fairly contained, but a further deterioration of bank credit quality could drag other industries lower as well. We are still in the early innings, so the range of repercussions remains wide. Traditional defensive sectors offer more protection in prior weakening credit cycles On analysing the impact of a further rise (by 200Bps) in credit spreads on US and European debt (highlighted by the dark blue bars) we found that not all equity sectors will be impacted equally on the downside. In fact, traditional defensive sectors like utilities, consumer staples and healthcare could offer some protection in comparison to cyclical sectors such as banks, energy and real estate. Since March 8, 2023, the steepest price corrections have been centred around the banking and commodity related sectors such as energy and materials, while technology, healthcare, consumer staples and utilities have managed to escape the rout illustrated by the grey bars. The historical sector performance (in the light blue bars) during Eurozone debt crisis (the second half of 2011), confirm a similar pattern whereby the traditional defensive sectors tend to shield investors when spreads widen. Europe earnings hold forth despite the banking turmoil Interestingly despite the recent banking turmoil, the global earnings revision ratio continued to show resilience in March. Europe stood out as the only region with more upgrades than downgrades. Earnings remain the key driver of equity market performance. Europe has clearly gotten off to a strong start and it will be interesting to see if European earnings expectations can hold up as credit conditions deteriorate. Within Europe we analysed the sectors that were most exposed to the banking stress. By observing the beta of the sectors in the EuroStoxx 600 Index relative to regional banking spreads, we found that real estate, financials, industrials, materials, and energy were most exposed on the downside to the high banking stress. On the contrary, consumer staples, information technology, utilities and healthcare showed more resilience. When the going gets tough, quality gets going Investors should focus on companies with strong balance sheets which we often tend to find within the quality factor. Quality stocks, characterised by a higher earnings yield compared to its dividend yield alongside higher return on equity (ROE) and return on assets (ROA), would offer a higher margin of safety in periods of higher volatility. Conclusion While central banks in US, Europe and UK continued their hawkish stance at their most recent policy-setting meetings, the evolving banking crisis could alter the path for monetary policy ahead. Chair Powell conceded that tightening financial conditions could have the same impact as another quarter point rate hike or more from the Fed. Given the rising concerns on the risk of banking industry contagion, shrinking corporate profits and central bank policy ahead we continue to believe that positioning your equity exposure towards the quality factor would be prudent.
FRED:BAMLH0A3HYC
by aneekaguptaWTE
CS Credit Suisse Group to $0.27 on Monday??UBS Group AG has made an offer to acquire Credit Suisse for as much as $1 billion. The Swiss government is planning to change the country's laws to bypass the need for a shareholder vote on the deal, as they seek to restore confidence in the banking sector following Credit Suisse's outflow of 10 billion Swiss francs in just one week. The proposed agreement, which is an all-share deal between Switzerland's two largest banks, is expected to be signed as early as Sunday evening. The deal is priced at a fraction of Credit Suisse's closing price on Friday. According to insiders, the offer was made on Sunday morning at a price of 0.25 Swiss francs ($0.27) per share, payable in UBS stock. On Friday, Credit Suisse's shares closed at $2.01 Swiss francs. I think we are about to see more bidders and the price go up from $0.27. Looking forward to read your opinion about it.
NYSE:CSShort
by TopgOptions
3
5 ways to play the current macro environmentWhy We Rallied It's been a strong few months for the S&P 500, which is up about 13% from the October lows. There were five reasons for the rally: 1) P/E ratios got attractive, especially for small-to-mid caps. 2) Inflation peaked, which historically has sometimes marked the bottom for stocks. 3) Global liquidity turned upward. Every major bond market was pricing a central bank pivot, and the big central banks (particularly Japan and China) added about $1 trillion to their balance sheets. 4) Economic data remained surprisingly strong, which raised hopes of a "soft landing." 5) Possibly there was a bit of forced buying due to a "short squeeze." Why the Rally Is Probably Over However, I believe we've now reached an inflection point where these tailwinds will turn into headwinds. 1) The S&P 500 and Russell 2000 P/E ratios are once again looking high (although S&P 400 and S&P 600 still look cheap). (See this report from Ed Yardeni.) 2) Inflation is no longer surprising to the downside. The last couple prints have been exactly in line with forecasts, and leading indicators of inflation have been creeping back up. See, for instance, this chart of service sector wages, this chart of copper prices, and this Goldman Sachs forecast of crude oil prices. This is partly because of the global liquidity boost and continued deficit spending , and it's partly because of China ending its Covid-zero policy and reopening its economy. (China is the largest importer of crude and the second-largest importer of liquified natural gas in the world.) 3) With inflation set to stay high, liquidity has tightened a lot. The market is no longer pricing a Fed pivot , and analysts suggest the central bank liquidity boost may be over . Stocks have now gotten significantly higher than liquidity measures would predict , which suggests they may need to come down a little. 4) Economic data are deteriorating. Leading indicators have been pointing toward recession for months , but consumer savings and a glut of job openings have helped delay it. We're definitely starting to see weakness, though. Credit card debt has soared to an all-time high , we're seeing more late payments , and the housing market is cooling off fast , with inventories of unused construction materials piling up . We've seen "soft landing" hype before: in 2000 and 2007 , just before those recessions hit. Unless the Fed pivots immediately, it's probably not "different this time." 5) The short squeeze is over for large cap tech, with most of the shorts already forced out. Five Ideas for How to Reposition How to trade a coming recession? 1) The obvious trade is long bonds, short stocks. Bond market valuations are very attractive relative to stocks, with bond yields only a little below the S&P 500's earnings yield, and bond markets having perhaps gotten too hawkish relative to policy rates. Given the historical correlation between 10-year yields and S&P 500 valuations, the gap that has opened between them may imply an opportunity for a statistical arb. Either stock valuations should drop or bond yields should rise. Historically, in a recessionary environment, the bond market has tended to recover first, and the stock market second. So now would be the time to long those bonds. However , it should be noted that this recessionary environment is an unusual one in a lot of ways. Stocks have already sold off a lot, and valuations are pretty mixed. Bonds should perform well if we get a deflationary recession that allows to Fed to lower rates, but a stagflationary recession might force the Fed to keep rates high even as the economy stumbles. Thus, it may be worth getting a little more specific with our trade. Here are some other ideas: 2) Long investment-grade bonds, short high-yield bonds. If recession is coming, then high-yield spreads are probably way too low . It's possible that high-yield bond rates will rise even as investment-grade, Treasury, and policy rates fall. 3) Long high-quality small- and mid-caps, short low-quality large caps. In my opinion, large cap tech is still way too crowded. I wouldn't want to short Microsoft right now, given the success of Bing AI. But I'd be willing to take a swing at Amazon, Apple, and Netflix as long as I could balance the risk by longing some cheap, quality smalls and mids on the other side. In my opinion, the size factor is ripe for disruption. If you'd asked me two years ago, I would have said that AI would most benefit large cap tech. Now I think it will most benefit smalls. What changed between now and then is that AI went from being the exclusive domain of big companies to being publicly available at shockingly low cost. This happened way faster than I ever would have guessed, and you better believe that small, agile companies will capitalize on the opportunities provided by access to AI! 4) Long cash to buy the dip on energy stocks. Energy historically has struggled in a recession, so it's quite likely that energy stocks will see some downside soon. However, the current free cash flow yield on energy stocks is quite high , and the sector trades at 10x forward P/E . Meanwhile, investment in the sector is still much too low . I believe there will be a decade-long structural bull market in energy due to constrained supply, but that there will probably be some recessionary pain first. Meanwhile, money market funds offer a really high return on cash. My Fidelity money market is giving me almost 4%. Ain't nothing wrong with just collecting that money market rate and waiting for energy stocks to dip for the buy and hold. With retail investor inflows at an all-time high , I believe the current market environment offers a good opportunity for savvy bears to execute some well-constructed long-short trades. If you look at how the smart money is positioned, it's pretty much the opposite of retail positioning here. There will be a time to get bullish on US large cap stocks, but we probably need to see some weakening of coincident economic indicators like employment first. (Stocks tend to do best when unemployment rates are high .) Remember, market positioning beats market timing, but ideally you could do a little of both! Thanks for reading, and please share your ideas in the comments below!
NASDAQ:VCLTLong
by ChristopherCarrollSmith
16