And it is flashing red…
And the bounce in the last two weeks has decoupled US equity prices from everything…
And if cyclicals underperformance is anything to go by, bond yields are set to tumble…
US Financial Conditions have tightened dramatically…
And as financial conditions have tightened, something dramatic changed in the way ‘smart’ money is flowing across the US equity market…
And while we have seen some panic in recent weeks, one very notable signal is not offering hope to the bulls – the put-call ratio is at its lowest since early 2017 – not the over-hedged ammunition for another exuberant leg higher in stocks…
As it appears the all-too-eager momo-chasers piled into calls on the first sign of a rebound…
Bond shorts rebuilt their positions a little last week (after 4 weeks of derisking) but previous metals bears unwound their positions further, and VIX positioning shifted further into net long territory.
Finally, we note that there is currently a record number of assets around the world with negative returns YTD…
And if 70 years of historical relationships are anything to go by, the S&P 500’s annual return over the next 10 years may be about zero.
In conclusion, we given John Hussman the final words:
“We can no longer rely on well-defined limits to speculation, as we could in previous market cycles across history.”
“In hindsight, the fix was simple: abandon the belief in any limit to the stupidity of Wall Street.”
…
“Despite its discomfort, the market decline we observed in October is only a drop in the bucket toward normalizing valuations.”
“Over the completion of the current market cycle, I fully expect the S&P 500 to lose close to two-thirds of its value from the recent peak.”
Is that what The Fed, The Deep State, or The Dems want?