VRA Weekly Update: We Recognize This Repeating Pattern Playbook. Investor Sentiment Flashing Buy.
/Good Thursday morning all.
It has been a mixed week for our markets as higher interest rates and our leadership tech/growth stocks tend not to be besties. As we are wrapping up the worst 30 day period for the markets but also as we prepare to enter the best 7 months for the markets (October- May, going back some 70 years) where approx 93% of all gains have taken place over the last 70 years..
So what’s going on here? This market weakness has the look and feel of a repeating pattern we’ve gotten to know pretty well over the last 18 months. It’s right out of the big gubmint’s playbook when they’ve attempted to get massive new stimulus approved from the onset of CV insanity. Crack the stock market lower, then miraculously, congress come together and voila, trillions in new stimmy get passed.
Team Biden…actually in this case its more Team Pelosi and Schemer…are having major issues with the squad. The left can’t get their coalition together on raising the debt ceiling, the $5 trillion + full-on communist budget, and now even the previously approved infrastructure deal appears in doubt. Add it all up and the markets are getting nervous. God forbid the govt shut down. Oh no Mr Bill! Whatever shall we do?
First, and this is the obvious, the US is not going to default on our debt. The debt ceiling WILL be raised, likely through continuing resolution. As to the $5 trillion + budget? We’ll file this in the “no one really knows” category just yet. They’ll like kick the can down the road. But for our purposes, we see the market turmoil from this drama ending soon. This repeating pattern playback ends with the market going higher. We remain aggressive buyers on pullbacks.
But what’s increasingly captain obvious, obvious, is that Biden has no coattails. And everyone in DC knows it. The right has most all of the (real) power right now.
And consumers feel the shift, under a leaderless country, with consumer confidence falling to a 7 month low.
With thanks to Ryan Detrick, the S&P 500 is about to be up 6 quarters in a row. Two quarters later the markets have never been lower. A full year later the average gain has been 15.5%.
And in none of these cases did we have a fresh $32 trillion in global liquidity “forcing” asset prices higher.
Investor Sentiment
The overwhelming bearish sentiment continues…one of our most important VRA Investing System indicators that continues to flash the “we must be long and strong” signal.
AAII has just 28.1% bulls to 40.7% bears (the highest reading for bears in over a year).
The Fear and Greed Index remains in “Fear” mode, with a reading of 28. Keep backing up the truck.
We remain extremely bullish.
The melt-up to Dow 100K is on. Our mega trends include unprecedented liquidity, surging corp earnings and outliers like the Millennial Generation, which has fallen in love with stocks, has tons of cash to invest, is the largest segment of the US population and is in the process of inheriting $72 trillion. Plus…currency inflation will continue to force stock prices higher.
Until next time, thanks again for reading…
Kip
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