In many cases, recessions are priced in well before they occur and markets can go up when the recession hits if it is mild in nature. Some have theorized that the US recession already occurred in 2022. In any event, those who forecast a US recession summer 2023 in 2022 missed the mark. Which partially explains the IT bounce imo. I personally think the NA economy is going to boom in 2024 ( roughly ) on the back of a surge in consumer spending coming out of Covid malaise and supply chain issues. Which puts me in a minority I guess.
The play could be clearly shorting any IT stock that rallies hard this year. Banks, Energy, and Small Caps are already oversold expecting a recession in 2023. Companies with little or no profits and questionable finances could be shorted as well ( eg DWAC ). So you can pick and choose high debt companies that may go under. High interest rates and a recession some would go to effectively zero. Copper and base metal miners usually do very poorly in a recession but that may depend on if China follows.
Over the years (about 30) I've seen people move to ADM and BG, if they believe a recession is coming. But those two have been "discovered" for safety, so it may be an non play...
I try and find balanced views, even though I'm a perma bear I guess every since 2008 because I do believe that the can just keeps getting kicked down the road and eventually, the debt bomb will hit. Anyway, I watch this guy's videos, and he isn't your typical doom and gloom guy. He looks at data. Germany is already in a recession after the revisions, so there is that. He also discusses how oil, even after the surprise cuts, just can't seem to go higher. He says OPEC cut production because they know the economy is contracting, and so even with cuts, oil still can't surge. Everyone freaks out about no extra capacity coming online, which should be bullish, but with demand dropping even faster, this is why oil can't spike higher. On top of this, he calls the China re-opening as having failed, which is what the world was counting on. Their growth hasn't been spectacular for April, and even though it was positive, this isn't saying much since previous April's were actually horrendous. Anyway, below is his channel. I'm not sure exactly which video to recommend as I forget which summarizes it nicely, and I watch them daily. But his main thesis is the highly inverted yield curve shows the government will be cutting rates by year end because of how much the economy will be hurting (and lets not forget, this is the market saying it, not just his idea). He goes over the oil cuts, as I mentioned above. He even talks about how unemployment is extremely lagging, and his charts support this. When jobs are cut, its only after well into a recession, so the FED talking so strongly about low unemployment is means nothing as a forecasting tool. On top of this, he uses the notes from 2007/08 to show how the FED got everything wrong, so there is no reason to believe them now. He says it all points to deflation. You seem like a reasonable guy who uses data, and hence I wanted to ask if you can refute Jeff's claims since he is highly data driven as well. https://www.youtube.com/@eurodollaruniversity/videos
Not trying to be a smart ass here but explain oversold. If for each transaction there is a buyer and a seller how can something be oversold. If it's oversold, why not underbought. Sounds like a term made up by sellers looking for buyers. Years ago I held oversold stocks until they went off the market
They’re ETFs then? I was looking at GOVT (bond fund) earlier… if the Fed turns dovish and stops cranking rates this will return to at least pre-COVID levels. https://finance.yahoo.com/quote/GOVT?p=GOVT&.tsrc=fin-srch
UVXY is an ETF yes but VXX is an ETN. But it would be years until the Fed would actually start to lower the interest rates. It hasn't even finished raising the interest rates yet.
I think they’re finished raising rates. Looks like a pause at least. How much further do you think they’ll go? Another quarter, half, or more? Also, all they have to do is make dovish statements and that will spark a move. Yes it may take years to cut rates, but even not raising rates at all sends a message that the hike is over… and the next wave is beginning. Everyone wants to be ahead of the curve.
I love selling short but hate paying the fees. I don’t want to sit in a short position for too long because they can really add up. So I’m looking for a long position, or maybe an inverse ETF. Someone suggested options? I suppose I could buy way out-of-the-money puts expiring at the end of 2024.
In this context I am referring to "oversold" relative to the intrinsic value of the company or sector. This could be due to several reasons : negative sentiment, short term news, overall market moves ( pulling the good with the bad ), seasonality, or even just randomness. Objective measures to look at would include long term technical levels, earnings reports ( cash flow and new income ), company debt, share buybacks, dividend payout and related affordability, or a really good outlook for a measurable reason. Order flow and volume often confirm if the market is on board my thesis short term.