Mid week market update

This week has been exhausting

Its not even Thursday yet and this week has already felt like it’s lasted three years. From the mid-day Monday melt down, to Tuesday’s SELL EVERYTHING wait not BUY BUY BUY no wait back to SELL EVERYTHING, and then yesterday’s ‘rally’, even when the market moves higher it doesn’t feel great or rewarding. Even when the market is moving in your favor you’re worried about another shoe dropping, leaving you paranoid, nervous, trigger happy, and unsure of what to do.

Weirdly enough this isn’t a completely bad thing.

In the last three weeks the market has gone from pricing in less than 10% odds of recession by the end of the year, to pushing 40% (according to predictive markets). We had less than 25 bps of cuts priced in then and now briefly touched 75bps of cuts early Tuesday. With that macro backdrop change came a growth scare, the nasdaq pulling back more than 10% tip to tail, and the S&P 500 down 6%. Stagflation is now the hot new topic of fear. Meanwhile all of the retail favorites have gotten murdered, with some down 50%+ while the index is down close to 1/10th of that, putting the fear of God into a lot of market participants who thought they were the smartest guys around.

With this chaos as a backdrop lets focus less on what has happened and more on what we think will happen next.