The Stock Market Bet You Can’t Collect On…

On Wednesday morning I joined Alicia Nieves on Cheddar’s “Opening Bell.”  Thanks to Alicia, Ally Thompson and Jovan Collins for having me on:

I started the segment by saying, “It never pays to bet on the end of the world because even if you’re right you can’t collect!” I went on to elaborate that the biggest risk in the Stock Market right now is to the UPSIDE, not the downside.

It’s a RISK because no one is positioned for it.   Sentiment is washed out. Here’s some data:

• AAII Sentiment Survey:  Retail Bullish Percent down to 23.40 last week – historically found near lows.
• CNN Fear & Greed Index: 17 = Fear Approaching 2020 Covid Lows.
• National Association of Active Investment Managers: Equity exposure at just 44.41% found near bounces and bottoms.
• 10 Day Moving Average Equity Put/Call Ratio at .625 (highest level since 2020).  The time to buy insurance (puts) is BEFORE the fire.
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We also covered the following points:

• Reaction to geopolitical risks/positioning portfolio for downtrending market.
• Companies with overseas exposure/exiting Russia.
• Outlook on airlines/oil prices in the near term.
• Fed’s approach to inflation.
• Take on tech profitability.
• Sectors with the most growth potential.

OUR UNDERPINNINGS FOR OPTIMISM:

1. BUYBACKS: $234T authorized for 2022 so far.
2. M2 GROWTH: Up 12.5% yoy.
3. EARNINGS are still RISING: $225.42 2022 est.  $248.07 2023 est. 8.5% growth for 2022.
4. CITI (positive) Economic Surprise Index jumped above 40 in in its most recent read. Highest Level in almost a year.
5. TRAVEL has bounced back! TSA Passthrough numbers approaching 2019 levels

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7. IMMUNITY rates are now high due to omicron. Anticipate a roaring recovery into the summer season coupled with a hard shift from “demand for goods” to “demand for services/travel/leisure.”  This will go a long way to alleviate pressure on the supply chain – and in turn – inflation.
8. To get a BEAR MARKET correction ~20%, you need a recession.  To get a recession, you first need a yield curve inversion.  While the yield curve is flattening, it is not yet near inverting (38bps spread).