It is clear that the phase 1 trade deal has pulled in a lot of money into equities, with the Dec. 13-19 2019 week being the largest weekly ETF inflow on record, with massive inflows into a couple of ETFs that I've never heard of, IVE and IVW.
Also, the past week covering the first 2 trading days of the year also had big inflows (Dec. 30-Jan 3, 2020):
After investors were reluctant to put money into equity funds for most of 2019, by December, it was a turning into a flood of money going into equity ETFs, breaking all time inflow records. But the liquidity coming from the corporate buyer will be low for January, as this is a very slow buyback month, with the buyback blackout period in effect for most companies till late January.
As everyone knows, the headline these days is on Iran, and possible retaliation after the US strikes. I wouldn't get too excited about a US/Iran military conflict causing a big selloff. I have yet to see a war cause a sustained selloff in the stock market. And even if there was one, its such a lopsided match that it would be like the Gulf War all over again if things did escalate. I don't see consumer or business spending being affected in that case, and the extra government spending to fund the war would be like a stimulus package for defense companies.
All the Iran news did was take attention away from the Democratic primaries starting in February. So if anything, it has probably delayed the selloff that I am looking for by a few days. Still bearish, and the US/Iran news has no effect on my market views. Still expecting a selloff in mid to late January, with a price target for the SPX roughly around 3100-3150.
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4 comments:
Are you still predicting a fall in the S&P500 before February?
Yes, still expect a drop in late January, but with the lack of weakness in bonds as stocks rise, I am less confident in my prediction. I haven't added to my shorts, and will probably wait till next week to decide to add or not.
Lot of indicators point to speculative excess, so I am still bearish.
If we do sell off this month, I don't expect a big drop, maybe down to 3200 at the most. The bond market is providing too much support here.
I am going to add short position before the fomc meeting.
need a adjustment!
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