Be nimble, be quick and don’t count on buying the dip.
That was BlackRock’s Investment Institute research arm laying out a non “Goldilocks” landscape on Monday for investors who are grappling with inflation and recession worries as earnings season looms big.
Our call of the day comes from the founder of Tao of Trading options academy school and author of the book by the same name, Simon Ree, who also sees now as a good time for investors to shake up their routine.
Included in his bear-market trading advice is a suggestion to hang onto “way more cash than you’re accustomed to holding,” and lose the traditional mind-set that dictates eggs are needed “in a certain number of baskets,” Ree told MarketWatch in an interview on Monday.
Rather than asking where to put their money, investors should educate themselves on “how to identify high probability moments in time to own stocks, to own commodities, to own crypto, whatever it is,” he said.
After that, the process should be “I’m going to buy it, I’m going to manage it and I’m going to set a profit target and maybe have just a few of those trades going through my portfolio every month or every year and just try and generate a return that way,” said the Singapore-based trader, who spent 25 years in private and investment banking, with stints at Citigroup and Goldman Sachs.
And a fresh strategy is all the more important as Ree braces for lots of volatility ahead. “Potentially tricky market here. I think stocks are setting up for a rally that will destroy shorts and get bulls nice and comfortable, before destroying bulls with a subsequent huge flush lower. Never seen stocks celebrate the prospect of recession quite like this before,” Rees tweeted last week.
Explaining that tweet further, he said cooling commodity markets could fuel hope that inflation has peaked and that the Fed will pivot in a dovish direction, driving stock gains. Markets appear to have priced in an immediate recession, but strong labor and housing markets will provide a buffer for now, he adds.
Those hopes could be sparked, or not, with Wednesday’s June consumer prices, which some see nearing 9% annually.
“But the bigger picture is this: monetary tightening has resulted in recessions in all but 10% of the cases since the Fed’s founding in 1913,” said Ree.
As for a bull-destroying flush lower to follow any rally, we may be in for a wait.
“I think once it’s confirmed we’re in a recession, the S&P 500 SPX could be a fair way lower than where it is right now, and the Fed will probably start easing again. I think that’s a long way down the track, and I don’t think the Fed will start easing until unemployment overtakes inflation as the concern of the day,” he said.
Our last word from Ree addresses what he sees as a blind spot among investors. “I think this buy-the-dip mentality has just been so deeply ingrained, I think by the time this bear market has run its course, people will have sworn off stocks for another generation…but that will be the buying opportunity.”
A new survey shows small-business owners have never been more pessimistic about the future of the economy. Later, we’ll hear from Richmond Fed President Tom Barkin.
London’s Heathrow Airport has asked airlines to stop selling tickets to cope with surging passenger demand.
PepsiCo PEP reported forecast-beating sales and earnings. We’ll hear from Delta Air Lines DAL on Wednesday, JPMorgan Chase JPM and Morgan Stanley MS on Thursday, with Citi C, Wells Fargo WFC and UnitedHealth UNH on Friday. By July 29, more than 70% of S&P 500 constituents will have reported.
The Dow DJIA, S&P 500 SPX and Nasdaq Composite COMP have opened in the green, with bond yields BX:TMUBMUSD10Y down and oil CL off down 4% and back below $100 a barrel over dollar DXY strength and China COVID worries. Bitcoin BTCUSD has dropped under $20,000.
These were the top-searched stock-market tickers on MarketWatch as of 6 a.m. Eastern:
Olympic champ Mo Farah said he was illegally trafficked as a child.
U.S. tourist faces charges for entering the crater of Italy’s Mount Vesuvius to get his phone
Galaxies far, far away, for the first time, compliments of NASA:
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