Equities become ‘no bid’ and %-stocks >50D now 2.0%...4 stocks (of 9) need to fall to reach 1.2% seen Mar 23, 2020 and Dec. 24, 2018

Equities have suffered an utter meltdown in the past week as the hot inflation implications of U Mich and CPI pushed stocks into “no bid.” There are many explanations offered for this, but the ultimate takeaway is that equities are in the midst of liquidation. As @jasongoepfert of Sentiment Trader notes:

  • 5 of the last 7 days have seen 90% of S&P 500 stocks fall
  • “Since 1928, there have been exactly 0 precedents”
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Rigged Pachinko — “heads I win, tails you lose”

Inflation has become the singular focus of markets. And the challenge for investors and markets is that the path of inflationary drivers from supply chains, consumer demand, war outcomes, labor markets are uncertain.

And given the cumulative uncertainties, markets have increasingly viewed the Fed as the single most influence on future outcomes. That is, markets have essentially assigned zero probabilities to “right tail” events (these challenges resolve without Fed intervention).

  • this focus on “left tail” outcomes means investors generally view every data point as supporting Fed needing to tighten monetary policy
  • a “heads I win, tails you lose”
The video in this report is only accessible to members

Equities have become capitulatory

Bottoms are dangerous. This is also why investors remain hesitant to tak...

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