Option Professor-Stocks-Get Ready-Things Are About to Get VERY Exciting-Are You Ready? Read
November 26 2022 Option Professor Opinions & Observations
Welcome Back! The stock market has just had a tremendous REBOUND off the OCTOBER LOWS which was NO SURPRISE to us as we said the VIX was at 35 AND we were OVER 600 SPX points UNDER our 1 yr SMA which was OVERSOLD ++ and we were entering a PERIOD WHERE THE MARKET MUST GO UP. We say that because use your common sense….Vanguard Black Rock Schwab JPM Merrill & the rest have many TRILLIONS of DOLLARS in both stock and bonds in client accounts. The YTD RESULTS in those account in October were DISASTROUS with the SPX at 3500 QQQ at 254 and the 10 yr Treasury Notes was at 4.33%…..this translated into TRILLIONS of looses in values in Stocks AND HISTORIC losses in Bonds which were supposed to be safe investments. Sure; you get your money back at maturity but 10-20 YRS.!
Clearly; the Fed doesn’t want a crash and a mass exodus combined with a buyers strike going into year end was NOT an option. Now the story of hold forever, buy the dip, keep adding has an audience again.
RIGHT NOW! Some stocks have come UP 100% off their LOWS. The CONSENSUS is that the Fed is close to the end & the terminal rate is 4.75% AND cutting rates next year is in the cards. Of course; it’s possible
HERE’S WHAT IS ALSO POSSIBLE…..The VIX is now at 20. This is EXACTLY the neighborhood where the rallies PEAKED in Jan-Feb and April and August. The P/E ratio on SPX has returned to higher levels. The SPX has rallied 550 POINTS above the LOWS. We see MAJOR SUPPORT 3800 RESISTANCE 4060-4175.
SOMETHING HAS GOT TO GIVE….We see 2 schools of thought (there are many schools:)….Let’s Consider 2
#1. Inflation will recede….rates will decline…jobs remain-consumer spends…valuations expand…BULLS rule In this scenario; the Fed gets SOFT LANDING & investors accounts are restored to the glory days of 2021 EARNINGS on SPX spike 2.50 and the valuation goes back to 20X+ so we get an SPX with a 5000 handle.
#2 Inflation is STRUCTURAL and with SHELTER calculated with OWNERS EQUIVALENT RENT extending the high level PLUS Food & other factors & inflations stays with a 4% to 6% handle in ’23-Fed Funds 5%-7%. Mortgage Rates have DOUBLED & the Dallas Fed talks of a 20% drop in housing (after Up 40% still high). Affordability (Income & Renters to Buyers) ugly-Income needed UP and only 1 of 8 renters vs 1 of 3 in ’21 The YIELD CURVE has INVERTED big time across the board AND has preceded the LAST 10 Recessions. Yes! the Timing is Imprecise (12 month on average) BUT the Eventuality has been precise. Consumers appear to have drained their savings & hit their credit cards to a RECORD level. Maybe they can handle it. LEVERAGE usually ends badly with higher rates & a Fed mandate still unfulfilled. Maybe HARD LANDING.
HOW WOULD WE PREPARE for 2023? Good Question and at this point you are Invited to Contact Us. Most of where investors get their information from is TV, Services, Advisors, Newsletters, Friends, Internet All of these sources may have conflicts of wanting eyeballs, recommendations and charges to defend. Yeah; you got a rebound lately BUT how happy are you with the ride in 2022 & do you really want more?
Call Us at 702-873-8038 or Email your contact info to [email protected]. We think We Can Help We EXPLAIN How to PROTECT portfolios Against Declines & Upside Surprises PLUS Review YOUR Markets in a 1 on 1 ONLINE session. This is an INDEPENDENT look at the Markets & Strategies YOU are Focused.
The Option Professor-Graduate of Boston College-Trained at The Options Institute-35+Yrs. of Knowledge
Give it a Try! You Should Have Done So Already!
Talk Soon,
The Option Professor
REMEMBER All investing involves risk of loss and it is not right for everyone. CONSULT YOUR BROKERAGE FIRM-advisor to determine your own risk tolerance & suitability. Past performance is not indicative of future results. Information and opinions are provided for informational purposes. It is NOT advice.
