over 1 year ago

    #Stock Market
    #Economics
    4 Reason the Bull Market Continues: WAVE TWO FOMO cover image

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    4 Reason the Bull Market Continues: WAVE TWO FOMO

    JF

    Jeremy Fielder

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    WAVE 2 FOMO
    • In June, Retail Investors poured a record $1.5 Billion into stocks: Top inflows Tesla, Apple, and NVIDIA ( J.P Morgan)
    • 22 billion estimated net inflow into domestic equity mutual funds and ETFs for the week ending June 16th. (IIC)
    The Short Squeeze
    • Short Positioning - S&P 500
    • Before the RALLY
    After the RALLY
    • I'm betting this continues...here's why

    1 | The Surprise Collapse of Inflation

    • Energy is the largest component of Inflation

    1. Global Manufacturing leads energy demand


    US + EUROPE + JAPAN. 👆🏾

    Germany + UK + FRANCE. 👆🏾

    China + Taiwan + South Korea. 👆🏾

    ​
    1. Cheap oil from Russia & Iran are capping prices; if Saudi cuts production, they lose market share.
    1. The virtualization of business and social meet-ups are here to stay. (just ask commercial real estate)

    The only reason CORE-Inflation is so sticky is that it's lagging real-time data...Sticky Inflation WILL FALL​

    • Zillow rents lead Shelter CPI by 6-12m, 

    Major Metro Shelter Inflation is negative

    New & Old, housing Supply, is rising, which should lead to = Lower prices

    Redfin Shelter Prices are falling

    The average performance of the S&P 500 following Peak CPI (last 70y)...right on target

    2 | Better than Expected Growth

    • The economy is still expanding, just at a slower pace. 

    • Home Builder ETFs at All-Time Highs, signaling confidence or positive sentiment

    U.S. Housing Sales are bottoming.Homebuilders are building
    • More supply = lower prices
    Labor market Strength signals sustained spendingHealthy Consumer Month-over-Month data

    The US Service Economy is holding up.

    Let's say Services roll over; well...that brings us to the next point...

    3 | MORE Stimulus

    • The Answer to Slower growth is more COWBELL

    The Answer to Bank Failures was More COWBELL

    ​BEST WAY TO GET RE-ELECTED - More Stimulus (MORE COWBELL)Infrastructure Bill - 1.2TChips ACT - 280BInflation Reduction ACT - 650BBidenomics - The White House Will Keep Stimulating the Economy

    Who benefits? 

    • RE-newable Energy
    • Electric Vehicles
    • Energy Storage
    • AI
    • Semi-conductors
    • Robotics + Automation 
    • Blockchain
    TECHNOLOGY

    So, More Stimulus means higher asset prices

    4 | Evaporating Volatility Risks

    Following the Debt ceiling resolution, The market risk narrative became " OMG Liquidity drain via TGA refill," as Banks become forced buyers of Treasury debt, draining liquidity. This would hurt Risk assets the most...but

    The Treasury is targeting MMF for Liquidity, preventing a drain in the bond market.
    • The U.S. Treasury is concentrating its debt issuance on short-dated bills to attract Money Market funds.

    • Money market funds are removing their cash from RRP and buying short-dated bills, which goes into the TGA

    • By taking liquidity from MMF, the Treasury avoids a "liquidity drain" from the banking sector ie, Risk assets

    Cash is leaving the Fed & into the Treasury account (TGA) because T-Bills are more profitable than RRP Yield.

    • The TGA build means The government can prevent recession with Fiscal Stimulus. If there are any surprises, the Fed cuts rates, the balance sheet grows, and Wallah asset prices increase.
    • So the biggest Risk is that Inflation comes back...not likely 
    Should you buy Real Estate?
    ​