We are currently ending the second week of July and I wanted to check in on the stock market and give you an idea of what I am seeing and how I am putting together the pieces.
Remember the mission statement!
We are all money managers and our job is to protect what we have, hedge against inflation and grow our funds, we accomplish this by setting aside feelings and ego and playing the odds.
Correlation #1: Fed & Stock Market
Lets look at the most obvious correlation here in the markets that has been following us around and that is the connection between the Fed balance sheet and the stock market, seen below…
Even though thats up till June, the spending really hasn’t slowed down by the Fed, they are still spending on average $150 million in corporate bond/ETFs everyday!
The Fed just finished their 3 month spending spree, taking their balance sheet from $3 trillion to $7.2 trillion, they have now posted their 4th consecutive weekly decline since the start of the bailouts.
Here is a quick look at the facilities the Fed is running right now..
Here is a look at the projected balance sheet spending in the months to come..
This is a whole report just going into this and our premium members get way more in depth data on the Fed daily, you can subscribe for just $1 per day if you like here.
Right now the rally you are seeing in the stock market is definitely not being led by fundamentals (wrote a long email on this last week), its being led by complacent retail investors and the Fed, in fact the highest rate of complacency in 20 years (next to August 25th 2000), sub 0.44
We have 25 million unemployed Americans (there was only 10 million during the Great Depression) yet the stock market is pumping? Waves and waves of new retail investors have been hitting stocks, penny stocks and now they are starting to work their way into crypto.
63% of jobless workers are making more on unemployment then with their jobs, yet Americans who receive unemployment benefits (with current $600 per week enhancements) are spending 10% more then when they were working.
Investors are all but sitting on the sidelines right now, not convinced in the V-shaped recovery.
What about Buffett? Well he lost $40 billion selling the bottom of airlines but made back $30 billion on Apple since the bottom on March 23rd, so he isn’t down that bad anymore, but Berkshire is still sitting on record amount of cash.
Correlation #2: S&P & Bitcoin
The next confluence or coorelation is between the S&P and Bitcoin, what makes this semi-amusing is sooo many crypto bros for so long were begging for institutional money, then it slowly came and has been accumulating at record low prices, while rolling out all kinds of new instruments (FTX really leading the way here) and its been following the stock market almost in lock step since the confufu breakout and people still aren’t happy.
You got your “consistency”, your lack of volatility has been there as Bitcoin is all but asleep- currently sitting at near record low volatility levels not seen since November 2018.
The traditional markets are rallying weekly on vaccine news and yet most of the market, including the “experts” are still unsure what happens next.