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.
2020 is truly unique, as gaid points out, when the stock market plummeted by more than 30% and then rebounded by nearly 50%. It all happened in less than eight months.
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.
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
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