RE: re over and out26 Jun 2022 18:42
My crazy view of the market
Since the last financial crisis in 2008 central banks around the world have held interest rates at effectively 0% instead of steady raising rates to a more historical norm of around 6%, so many households & businesses became addicted to basically interest free money
When coronavirus came along the federal reserve in the USA started buying bonds to support the market to avoid another financial crisis, this process went on for far too long, causing the stock market, especially the Nasdaq, to be ridiculously over valued and ready to burst, the ultimate result was inflation, where we are today
The markets have come off their all time high from the beginning of this year, which I expected & have traded successfully, i have now closed my shorts positions and am fully in cash evaluating the next move
The US dollar has reached an all time high this month partly due to the fed raising interest rates & partly due to its safe haven status currency, this along with the recession risk has deflated many commodity’s ie copper, wheat, which generally trade the inverse of the USD. This in turn will effect mining companies which the FTSE has many. Banks in the UK will benefit from the higher interest rates but will be punished by increased defaults on loans due to the recession.
The fed is now trapped between raising interest rates too fast & causing a recession or raising too slowly and allowing inflation to become entrenched
My view is the fed will take a 3rd and more destructive route, they will continue to raise interest rates just enough until the inflation figures start to come down, then they will stop raising rates. This will be fantastic news for the stock markets that the fed has finished its tightening cycle, it will rally aggressively, only to stoke up inflation once more, the fed will then have to start raising interest rates all over again, this will be the catalyst for the stock market crash, many including me, have been waiting for.
So my overall view this year is that the lows are not in yet, I expect some quarter end positioning next week by the big funds so it could go either way, the banks reporting season in the US starts the week after. All eyes will be on the inflation figures, when they start coming down the market will rally, possibly mid next quarter. I feel the crash will be end of this year beginning of next.
I mostly play the US SP500 index at the moment as it the most liquid & traded in the world
3ULS = 3 x short the SP 500
3USL = 3 x long the SP 500
Be careful with these, they can be savage if you get on the wrong end of them, have a look at the charts
As regards individual stocks, I won’t be buying any this year, I plan to buy dividend paying funds after the market crash, ISF etc, IUKD is a good one, I have played this one a few times, even just for a quick in and out to pick up the dividend
Just my thoughts.
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