Originally published at: https://peakprosperity.com/finance-u-did-retail-pile-in-at-the-exact-wrong-moment/
Sometimes politics and markets collide. Now seems to be such a time with the explosive and radicalizing revelations about the sprawling and long-running conspiracy to abuse children by powerful so-called ‘elites.’
Mood and sentiment are important to markets, especially those stretched into nosebleed territory like the US equity markets. The chance of experiencing more ‘volatility’ going forward is now increased. By the way, ‘volatility’ is the code word used by Wall Street and the Fed to indicate that stock prices went down instead of up. For some reason, prices spiking higher isn’t volatility, only lower.
One possibility: Republicans are so disgusted by it all that they feel dispirited and they stay home on election day, thereby granting a default win for Democrats. That, in turn, leads to government gridlock and impeachment hearings. All of which could lead to “volatility.”
To counter this, the Federal Reserve has already begun aggressively printing more money. They don’t call it that…their newly minted preferred term is “reserve balance management,” but it’s printing.
Meanwhile, ‘retail’ (that’s you and me) have gone on an absolute buying spree for equities…almost as if programmed to take the most risk at the least opportune moment.
Wall Street lovingly refers to us as “bag holders.”
While headline equity indexes have been holding up reasonably well, Paul made the point that despite retail piling in, the indexes have not managed to break out to new highs, but only bump along for months.
Beneath the surface, things get more concerning. When equity markets get toppy and ready for a fall, we usually see “sector rotation.” That means away from the high fliers of the past and into defensive stocks, such as consumer defensive, REIT’s, utilities, and basic materials.
Here’s the Year-To-Date of the S&P 500… sector rotation is clearly in play.
The Big 7 are being quietly walked away from…which might turn into a scramble.
Meanwhile, homes aren’t selling, and student loan defaults and mortgage delinquencies are both spiking.
Add it all up, and now is the time for a risk-managed, cautious approach. Yet retail, as we noted, is piling in as if a brand-new bull market were just about to get started; they are fearful of missing out (FOMO) when they should be considering preserving gains.
Timestamps
00:00 The Darkening Economic Landscape
03:02 Federal Reserve’s Printing Press Returns
06:11 Retail Investor Behavior and Market Dynamics
09:03 Sector Rotation and Market Resilience
12:02 Political Uncertainty and Market Implications
14:53 Housing Market Stress and Economic Indicators
18:06 Rising Property Taxes and Economic Burdens
20:57 The Impact of AI on Employment
23:53 Global Economic Pressures and Commodity Markets
39:22 The Future of Work and AI’s Impact
41:33 Retirement and Meaningful Engagement
43:56 The Struggle for Purpose in a Changing Society
46:15 The Rapid Evolution of AI and Its Consequences
49:07 The Unpredictable Nature of AI
51:53 Preparing for Financial Uncertainty
55:51 Trust and Integrity in Financial Markets
01:01:08 The Importance of Character and Reputation
01:10:20 Taxation and Future Financial Planning
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