The Market is Going to Crash
The current situation is rough. The Fed is currently trying to calm inflation without causing a recession. This is beginning to seem less and less likely. With the labor market staying strong, GDP continuing to drop and inflation powering forward it appears as though the Fed may have to take drastic measures to calm inflation, which could cause a recession. The bond market definitely agree with this as the 6 month yield is about the same as the 30 year indicating a high chance of a recession.
The markets didnt hear that during this rally, instead they saw corporate earnings, which weren’t as bad as expected and therefore the markets rallied significantly. However insiders of the companies that rallied are selling hard. According to Zero Hedge insiders are dumping the most stocks since January. This indicates that insiders are taking advantage of the rally created by retail investors to sell there positions at artificially inflated prices. Additionally, according to a Bloomberg article that cited BofA data, bond inflows are the highest since November while stock outflows are resuming. It certainly looks like smart money is beginning to leave equity markets.
I believe that this rally came from better than expected corporate earnings and uncertainty being removed from the markets. And while both of these things are legitimate reasons for stocks to rise, a 13% rally is definitely over the top. With economic data such as CPI just around the corner and a less than favorable macroecomic situation I believe that stocks will return to a more reasonable valuation in the coming weeks.
Disclaimer: None of what was stated above is financial advice, please come to your own conclusions and feel free to leave your own opinions in the comments.
Submitted August 05, 2022 at 11:28PM by Rojolithos
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