![]() ![]() I’m assuming that some of that is attributable to “post-pandemic demand normalization” (a vividly clear reveal from PTON and NFLX) and some is attributable to the tightening of financial conditions (30-year real rates have backed up 50 basis points since the start of December, that’s a jarring reset in any context). I should note that even as S&P was making higher highs into year-end, these cohorts were under major pressure and they have remained under the de-rating hammer ever since.ģ. Witness these moves in GS thematic baskets since their November highs: Bitcoin-sensitive equities -50%.non-profitable tech stocks -41%.recent IPOs -39%.highly valued software names -36%. As the bonanza in financial conditions ends, we’re seeing the tide go out on the most speculative assets. To level set - and, you knew this coming into the year - the best days are behind us in two seminal respects: (1) in a concession to reality, the Fed has very clearly transitioned from a radical easing campaign to the early innings of a tightening campaign (2) at the exact same time, the fiscal dynamics have shifted from dramatic, if unprecedented, spending to a significant hangover.Ģ. Here’s an attempt to simplify my thinking on the current rough patch and the road ahead:ġ. So, the new year has been characterized by bad news, bad technicals, bad liquidity and thus bad attitudes.and, for S&P, the 8th selloff of 10% (or more) in the post-GFC era. More broadly, it’s been a very high velocity period across the macro complex - oil rallied to levels not seen since 2014, US real rates were running across the curve - which adds turbulence and correlation shifts to the equity equation. In turn, S&P is coming off its worst week since March of 2020, NDX is tracking for its worst month since October of 2008 and RTY is knocking on the door of formal “bear market” designation. ![]() To set the current scene: inflation has been north of 5% for seven consecutive months.the Fed is in retreat.and Biden’s fiscal agenda is stuck. In turn, the markets unleashed a speculative feeding frenzy - including penny stocks, celebrity SPACs, cannabis ETFs and ultra short-dated call options. Just twelve months ago, amidst 1.4% headline inflation, the Fed was buying $120bn bonds a month and the Biden administration’s opening salvo was a $1.9tr fiscal package. ![]()
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