Portfolio Update: Confirmation of the Next Phase of the Cycle Happening this Week
Members, You are Going to Want to Hear this. FOMC, Big Tech Earnings, and GDP data.
Expect Volatility this Week as 2nd Half Expectations are Priced in
It has been speculated since the beginning of this year that the first half of the year will be volatile. However, in the back half of the year we could see a large rally in the equity and bond markets. The funny thing is, I don’t think people are catching on, just yet, to how the markets are evolving and how this can even be possible. Below, I receive a tweet like this at least 2-3 times daily. I hear everyone, I really do, and I understand but it’s becoming incredibly obvious and I noticed it in the beginning of 2021.
Traders and investors are Front Running the Federal Reserve
With over 100 years of data, we can go back to Fed policy pivots and quickly identify exactly when the market bottoms or tops. Typically, these bottoms and tops have been within days of FOMC meetings. We can even recollect in recent history in 2021 where the top of the market was in November of 2021, near the FOMC meeting, when JPow pivoted aggressively away from accommodative policy to a very hawkish rhetoric.
The problem with this philosophy today, is that, 2016 and 2018 market bottoms happened with the change in EXPECTATIONS. 2021 was no exception.
In this weeks publication, we are going to discuss the upcoming week and how/why it is arguably one of the most important weeks this year in the stock and bond markets. In addition, of course, I will provide an update to my growth stock portfolio.
I made a lot of adjustments this last week as earnings data rolls in. There is a lot to share.
The format will be as follows:
Macro: GDP Data, FOMC meeting and the Future Movement of the Markets
Earnings: The companies, the risk and potential movement of the market at large from arguably the most important week for earnings
Portfolio Adjustments: A business that revalidated the original thesis in a devastatingly bearish market and where/why I moved money around into different positions
The Future Evolution of Inflation, the Economy, and Fed Policy
Briefly, let’s touch up on exactly where we are with current data. Then, we are going to focus on whats priced in, the future, and what it means for equity and bond prices moving forward.
Inflation is a disaster, GDP data is expected to be negative and the Fed is hiking rates. But, there is good news that I think people don’t “want” to see.
You know how certain people like to not get their hopes up? I know quite a few people like that. It seems to be something in an individuals nature that does this to protect themselves from being let down. But, the data is the data and we can’t be driven by emotions and must be driven by a fundamental understanding that economic and market cycles exist. The question is not “will the markets go up?” It’s more about understanding where we are in the market cycle and how it will evolve. So what does the data say today?
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