October 11, 2024
The S&P500 closed at 5780.05 yesterday 10/10/24, from the last post the market has gone up about 2% or 100 pts.
I’ve sold generally most of my positions, and only invested 15%. I’m also short the market for the first time in a long time. I’m short SPY and SEMIs.
Before going into the reasoning of this, first some charts:
Historical NQ Performance after the first rate cut.
SP500 performance after the first rate cut during the GFC.
Google search trends of individuals searching, 'how to declare bankruptcy', on the rise.
Google search trends of individuals searching, 'personal loan', on the rise.
So, I’m short. Am I max short? No, I’m about 0.003% short of my total portfolio. I forget who was it, but I believe it was George Soros, and he mentioned that if you truly believe in a thesis such as a short, it must have solid reasoning/foundation, and if you are going to do it, to go for the jugular. He did not view a short as a hedge, but as an investment/trade vehicle, contrary to many that short or those who buy puts as hedges; him (Soros) and others like Burry view shorts/puts as trades.
Now, I won’t go all in short, and as you see, I’m not even 1% short, but I’m psychologically involved in this trade, and onto the why?
I rarely try to do these macro plays/thesis as they usually fail, but given the above we are surprisingly in a worst period than in 2020. Amazingly Google searches for ‘personal loan’ and ‘How to declare bankruptcy’ are higher now than in the crisis of 2020. We also see the backdrop of rate cuts historically begin a down cycle for assets, specifically growth assets like stocks in the SP500 and Nasdaq, but Nasdaq is often more affected.
Below is the Total Business Sentiment Index - “The business sentiment index is highly correlated with the performance of the US business sector. Generally, if confidence levels surpass an index value of 50.0, the economy is considered to be expanding, whereas confidence below 50.0 indicates a contraction.Sep 23, 2024 IBISWorld” and the US Index of Consumer Sentiment.
The Total Business Sentiment Index shows we are levels below 2020, and nearing the GFC area of 2008. Consumer sentiment is below 2020.
I’m not calling for you to short, and as all readers know none of this is financial advice, but as for what I am doing, I will be going to go to the clerk and cashing in my lottery ticket.
I’ll keep about 15% on the table and keep the dealer going with that, but for now as I showed in the previous charts above, rate cuts have historically not been good news for the market and economic indicators are flashing yellow (caution) ; the disconnect is when will the market notice. Only one year (2019) after rate cuts, did the market not experience marked volatility, and in 4 of the 6 instances we experienced a 10% drop in the SP500 within the first 150 days and in only 1 (2019) instance did the market go above 10% in the first 150 days from the first rate cut.
The odds aren’t good enough for me to stay long.
Stay safe!
Disclaimer: Please note that all information shared here is for informational purposes only and not intended as financial advice.
