S&P 500 IndexShort
The Crash of 2022
Correlations between all sectors of the market have moved increasingly to one throughout the year. The correlations have become even tighter since Jerome Powell's Jackson Hole speech.
Stocks and Bonds continue falling even though they are very oversold. Crashes happen in oversold markets.
Worsening liquidity problems in markets, rising interest rates, and bonds falling in tandem with stocks around the world are likely to ignite a financial crisis.
Money supply growth has stagnated since the beginning of the year. Money supply growth began stagnating early in the year in 1929 as well. The government began tightening spending on New Deal programs in 1936 before the crash happened in 1937.
Earnings contractions YoY in Q3 won't justify the current level of valuations and future earnings expectations. Many analysts are still expecting earnings growth in 2023. These forecasts will have to be adjusted to match reality, which will be another negative hit to investor sentiment.
The economic contraction continues to worsen, with mounting job layoffs being announced, falling capex spending, and worsening sentiment among management teams and investors alike.
The current market setup looks very similar to 1929, 1937, 1987, and 2008. All of which topped between Mid August - Early September before crashes of over -30%. All of these crashes took place over the span of less than 3 months, with the majority of the decline occurring over a period of 2-3 weeks. (I'm referring to length of the crash phase and not to the entirety of the bear market)
IN SUMMARY: The current level of overvaluation, rising interest rates, a worsening recession, and stubbornly high price inflation are a toxic mix. I think the market is in for the largest crash since The Great Depression.
Good Luck to Everyone
- Alexander
Stocks and Bonds continue falling even though they are very oversold. Crashes happen in oversold markets.
Worsening liquidity problems in markets, rising interest rates, and bonds falling in tandem with stocks around the world are likely to ignite a financial crisis.
Money supply growth has stagnated since the beginning of the year. Money supply growth began stagnating early in the year in 1929 as well. The government began tightening spending on New Deal programs in 1936 before the crash happened in 1937.
Earnings contractions YoY in Q3 won't justify the current level of valuations and future earnings expectations. Many analysts are still expecting earnings growth in 2023. These forecasts will have to be adjusted to match reality, which will be another negative hit to investor sentiment.
The economic contraction continues to worsen, with mounting job layoffs being announced, falling capex spending, and worsening sentiment among management teams and investors alike.
The current market setup looks very similar to 1929, 1937, 1987, and 2008. All of which topped between Mid August - Early September before crashes of over -30%. All of these crashes took place over the span of less than 3 months, with the majority of the decline occurring over a period of 2-3 weeks. (I'm referring to length of the crash phase and not to the entirety of the bear market)
IN SUMMARY: The current level of overvaluation, rising interest rates, a worsening recession, and stubbornly high price inflation are a toxic mix. I think the market is in for the largest crash since The Great Depression.
Good Luck to Everyone
- Alexander
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