2023 Brings Unprecedented Market Growth Despite Predictions
This week was critical for the Federal Reserve and the global markets in general.
This week was critical for the Federal Reserve and the global markets in general. There were several announcements, including an increase in interest rates. During 2022, we saw the most aggressive interest rate increases in history. This caused all types of assets to decrease, from high-risk assets (technology stocks) to cryptocurrencies. At the end of 22, most of the market thought 23 would be one of the worst years in history. But what if it's not?
We announced several weeks ago that when there are such negative expectations about the markets, all the fear has usually been discounted from the price.
This confirms our idea that correctly reading the macroeconomy is synonymous with success in the markets in the long term. Regardless of whether stock X or Y has better performance, if you are able to read the markets, you will know how to position yourself against them.
Helping our subscribers understand this is one of the tasks we do best and enjoy doing.
Inflation cycles
Remember that in inflationary cycles like the current one, the improvement of inflation is a great positive factor from a macroeconomic point of view. People forget, but the markets do not, and that is why, in my opinion, the stock market is now rising and will continue to rise beyond the corrective movements that are natural to the stock market.
Look what happened in the 70s and early 80s. At the moment that inflation peaked, the markets bottomed out, almost like a Swiss clock.
In the case of the inflation we experienced as a result of Covid 19, we can say that it peaked in June of last year. At that exact moment, the market bottomed out, and although it did continue to fall, we warned you that it was a very positive sign in the medium term (1 year).
Obviously, macroeconomic conditions are not dependent on a chart, although many market gurus try to make us understand that, but we must have several indicators that make us contrast that this information was correct.
One of the data is the market sentiment. A few weeks ago, we emphasized that the market always tries to do the most damage to the largest number of people. Therefore, if the consumer sentiment index is the most negative of all time, this can only mean that to damage all those waiting investors, it expects at least one positive year.
On the other hand, another indicator that is very aligned with all of the above is the market breadth, and when this index reaches 200 points, it is almost an unequivocal sign that the markets will react in the opposite direction.
In the last 25th, we reached that level. This can only mean that our probability of the market turning around appears.
Absolutely no one can know what short-term market fluctuations may occur, but based on everything expressed and what we are observing at present, my opinion is that the probabilities are bullish in the medium term (one year ahead).
But the important thing is not to be right, but if I'm wrong, we have a good asymmetric strategy that allows us to be covered against all types of uncertainties that may occur, and this is precisely what we try to do with our portfolio. This is what every investor should look for: to be protected and make money.
This week we bring you a new visualization to simplify the overall view of it so that you can follow a winning strategy in the long term.