Macro Insights/Report: The next move for equities
Let's zoom out a little
I want to zoom out a little because people tend to have difficulty separating short-term signals from the long-term skew of assets. There is one main idea I want to focus on today:
Everyone is underweight equities!
Why do I say this and why does it matter? Think about it like this, we just finished the FED’s hiking cycle and the FED funds rate is above 5% right now.
This means there is a TON of capital in the “T-Bill n chill trade.” Everyone is collecting their risk-free return in money market funds and they feel so smart. The Bears still sound incredibly smart with their well-constructed narratives.
In this context, equities are about to make all time highs! I already noted in my most recent macro report that equities are likely to make ATHs in Q1:
What do you think people are going to do when the FED starts cutting and equities make ATHs across the board? They are going to panic, pull their capital out of money markets and slam it into the SPY ETF.
SPX is almost at highs:
HYG is about to make ATHs as well:
And the NASDAQ has already made ATHs!
The crazy thing is that the cuts haven’t even begun yet! Yes they have been priced in on the forward curve but when they begin to be realized, it will cause even more capital to shift across the risk curve.
This is why Bitcoin has been rallying so much. It is sniffing out the future change.
My partneris going to be doing a comprehensive analysis on of the short-term catalysts for managing these moves and explaining HOW to generate alpha in them.
From a big picture perspective though, equities are very bullish.
I want to break down some shorter-term signals for execution within this larger skew though.