Expect Volatility

The forecast provided in the past couple of years or so via various articles I have shared on this website, has certainly come to fruition.

For those of you that follow Macro indicators, it is undeniable that first mistrust (REPO market blowoff), then euphoria (record assets valuation), and ultimately inflation, have been causing quite a bit of turbulence in our financial lives, be in in your 401K, your purchasing power, or even your employment status.

So where are we now?

The REPO market is still in shambles (Big banks - the Too Big To Fail ones to be clear - are not "trusting" each other for what they see ahead, therefore not lending at sustainable rates which forces the FED to step in and provide liquidity as the lender of last resort. Ok until it works, however this continues to be a massive warning going forward as trust is all that keeps financial markets afloat when debt is so prevalent as it is these days.

The stock market has been suffering, with several areas completely decimated during the last 6 months. The last man standing, and one that will undoubtedly start appreciating very quickly soon, has been gold. Flat on the year, if you had a large portion of your assets parked in gold as I do, you would be sitting pretty well right now. It hasn't yet protected you for inflation YTD, however I believe that will change very suddenly with the precious metal massively outperforming most other assets.

Inflation - should I even comment here? Inflation is a massive tax that you have not voted for, which effectively makes you poorer by the day. Latest read has been +8.6% in May vs 2021, highest since December 1981. I have been warning everyone in my circle about inflation for quite some time, before it even started to be registered in official reports. Even when inflation subsides because of demand destruction, prices will remain high which will not provide any relief for most people.

Interest Rates - they have been raising dramatically. Ghost companies will not be able to service debt and the Real Estate market will soon suffer dire consequences. If you have cash, soon it will be a very good time to buy real estate as prices will inevitably be coming down.

Where are we going?

For the next few years I expect strong Volatility.

This might play out in a variety of ways, tough to predict obviously. In fact, based on the technicals I follow for my own investments, even the bull market cycle for stocks seems incomplete. Until proven wrong, I expect at least a higher high in the S&P in the next 6-8 months, somewhere in the 5,000 to 5,500 SPX. If it happens, it will catch everyone by surprise. That is the scenario I am playing at this stage. If it does happen, it would represent the ultimate blowoff top for many years to come.

Housing - I expect the market to continue to soften and prices to come down, in some regions of the country significantly.

REPO market - it will break. Counterpart distrust will create some news worthy company failures in the next several years.

The FED - they are in a corner. They either continue to tighten, destroy demand and cause a massive crisis. Or pivot, resume QE and cause a massive crisis because the dollar value will effectively tend towards zero. Either way a crisis is coming so stay safe out there and reduce debt now if you can.