Fund managers who have successfully predicted the bottom in March warn that US stocks may collapse seriously

category:Finance
 Fund managers who have successfully predicted the bottom in March warn that US stocks may collapse seriously


Although his ATAC revolving fund has since continued to perform well - up nearly 60% so far this year, one of the best of its kind, he is still waving the yellow flag.

This is a crazy time for the market, gaid said, despite the severe deterioration of the global epidemic. The record of daily new outbreaks continues to be broken, and the US response has failed completely. And the U.S. economy was teetering before the Federal Reserve issued a new monetary policy response, but the stock market seemed to recover without blinking an eye.

Gaid has been bullish since the bottom in March, but he now says major market indicators are likely to signal a serious crash in the stock market.

For example, 10-year Treasury bonds yield about 0.5%, while 30-year treasury bonds yield less than 1.5%. He said this laid the foundation for a possible mean regression.

Its often said that bond market investors are savvy investors who tend to lead the stock market in predicting economic activity, gaid explained. The fact that yields have not risen substantially in a very short period of time (on the contrary) is quite disturbing because historically, such short-term volatility has tended to occur before periods of significant stress on the stock market.

In addition, he pointed out that the performance of public utility stocks may bring some warning to the market. Utility stocks are often seen as a hedge against recession. He gives this chart of how defensive investments outperformed the S & P 500 index in the past month (orange is the performance of utility ETFs)

It should send some dangerous signals to stock investors, which, frankly, makes me hesitant. A similar event happened just before this years collapse in the covid stock market, he said

Finally, overconfidence can be a serious problem, with Mr. gaid citing retail traders recent trading frenzy.

In a year of expected economic disaster, the S & P 500 is doing well, the NASDAQ is soaring, and no one seems to think the market will fall. It seems that everyone has forgotten that investing in stocks is risky - and the situation is changing so fast that it seems that risk may return, he wrote in a recent report

Source of this article: Yang Qian, editor in charge of CFA_ NF4425