The #MysteryBroker checks in: Pessimism has reached extremes (historic lows in AAII survey bulls, equity fund outflows, his proprietary sentiment gauge), limits immediate downside and improves multi-month risk/reward for stocks given imminent-recession fears he sees as overdone.
The #MysteryBroker thinks the market has probably overshot likely Fed rate-hike path, Treasury yields set to peak within two weeks and ease lower for a couple months. He’s among those who think we’re tracking the 1994 bond-crash/Fed-hiking/volatile-stocks scenario.
The #MysteryBroker sees commodity, used-car inflation ebbing, views oil/food inflation as largely neutral for the economy in aggregate. Travel, auto demand strong. Earnings look OK, S&P 500 P/E 18.6x but a more reasonable 16x ex the largest 5 stocks.
The #MysteryBroker thinks high-yield spreads should widen in coming months, and would short junk bonds vs. Treasuries, so he doesn’t expect an all-out risk-on environment any time soon.
The #MysteryBroker sums up: “Investors have now priced in Fed rate hikes beyond what is reasonable, thus nothing left for financial markets to fear...Just have to weather the storm from the current downward move..."
The #MysteryBroker's bottom line (cont.): "Friday was a real wash out day with even the safe havens falling which is what is needed before a trading bottom.”
That's it, but read the disclaimers.
And please don't go requesting updates, it never helps and they will be ignored.
And please don't go requesting updates, it never helps and they will be ignored.
https://twitter.com/michaelsantoli/status/1126487466540617728
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