Transcript

Storm Clouds. · ANGLES.

0:01
SPEAKER_00: Storm clouds, my weekly market review, August 11th, 2024.
0:07
SPEAKER_00: It's not often you get the kind of violent concentrated two-way turbulence that we experienced last week.
0:14
SPEAKER_00: In the course of three days,
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SPEAKER_00: the S&P 500 had both its worst day since 2020 and its best day since 2022 and still
0:23
SPEAKER_00: ended the week unchanged.
0:27
SPEAKER_00: The ferocious global market rout from the end of the prior week intensified on
0:32
SPEAKER_00: Monday as more storm clouds rapidly gathered over financial markets around the world.
0:38
SPEAKER_00: All hell broke loose in Asia,
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SPEAKER_00: where Japanese stocks got smashed by over 12%,
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SPEAKER_00: suffering their worst day since Black Monday in 1987 and European markets rolled over.
0:51
SPEAKER_00: It was likewise a bloodbath for risk assets over here once the US came online,
0:56
SPEAKER_00: with the big tech AI darlings and crypto in particular in the eye of the storm and
1:02
SPEAKER_00: getting ruined as large institutional market participants with huge leverage
1:08
SPEAKER_00: positions in these type of assets were forced by market conditions to unwind them
1:13
SPEAKER_00: all in short order,
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SPEAKER_00: creating a vicious feedback loop.
1:18
SPEAKER_00: After what was the worst trading session for US stocks since the early COVID panic
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SPEAKER_00: of March 2020,
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SPEAKER_00: indexes closed off their lows for the day,
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SPEAKER_00: but with no immediate signs of any kind of circuit breaker,
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SPEAKER_00: as we're currently in the midst of a mini dead zone for economic data releases.
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SPEAKER_00: The bloody baton was passed back to Asia and a chunk of Monday's wreckage was
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SPEAKER_00: immediately repaired,
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SPEAKER_00: with Japanese stocks jumping over 10%,
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SPEAKER_00: their best day since 2008.
1:52
SPEAKER_00: Europe didn't exactly rebound, but at least managed to stop the worst of the bleeding.
1:58
SPEAKER_00: Some semblance of order and calm returned to US stock markets after the opening
2:02
SPEAKER_00: bell on Tuesday,
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SPEAKER_00: as investors began to cautiously sniff around for bargains after the massive sell-off.
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SPEAKER_00: The storm clouds retreated further as the sense slowly grew that,
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SPEAKER_00: shocker,
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SPEAKER_00: markets may possibly have overreacted to an admittedly underwhelming but hardly
2:23
SPEAKER_00: god-awful jobs report the Friday before.
2:27
SPEAKER_00: and the indexes finished the session nicely higher, clawing back around a third of Monday's losses.
2:34
SPEAKER_00: The Asian and European recovery continued on Wednesday and initially followed
2:39
SPEAKER_00: through into the US as the Fed continued to wheel out officials to vigorously push
2:45
SPEAKER_00: back against the narrative that the central bank has been caught offside and is
2:50
SPEAKER_00: losing control of the economy.
2:53
SPEAKER_00: However,
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SPEAKER_00: stocks failed to hold on to the impressive early gains as a broad-based wave of
2:59
SPEAKER_00: selling resumed after lunch and the indexes finished lower on the day,
3:04
SPEAKER_00: underscoring the market's continued fragility.
3:08
SPEAKER_00: Asia and Europe slid a touch lower on Thursday,
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SPEAKER_00: but US markets benefited from lower-than-expected weekly jobless claims and the
3:16
SPEAKER_00: continued sense that Monday's carnage was maybe just a fever dream and that the
3:22
SPEAKER_00: reality police had perhaps arrived.
3:25
SPEAKER_00: Stocks raced higher from the start, led by rapidly recovering tech names.
3:31
SPEAKER_00: The rally gathered pace as the session wore on,
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SPEAKER_00: helped by more decent earnings reports,
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SPEAKER_00: including from the Magnificent 7 wannabe,
3:40
SPEAKER_00: Eli Lilly.
3:42
SPEAKER_00: The S&P 500 ended up having its best day since November 2022.
3:48
SPEAKER_00: A schizophrenic week came to a close on Friday after mostly positive Asian and
3:53
SPEAKER_00: European sessions fed into the US markets,
3:57
SPEAKER_00: which paused for breath and drifted a tad higher in a rather exhausted super light
4:03
SPEAKER_00: volume session ahead of an economic data heavy week.
4:09
SPEAKER_00: Astonishingly,
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SPEAKER_00: given the extent of Monday's massacre,
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SPEAKER_00: the S&P 500 finished Friday exactly where it had been a week before.
4:19
SPEAKER_00: It's really,
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SPEAKER_00: really important to note that the sharp brutal declines we've seen in the last
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SPEAKER_00: couple of weeks are far more a result of the investor complacency about a sudden
4:31
SPEAKER_00: economic shock and resulting highly leveraged over optimistic positioning that I've
4:36
SPEAKER_00: been banging on about for months now and not yet about a significant deterioration
4:43
SPEAKER_00: in economic data.
4:45
SPEAKER_00: Many big tech stocks,
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SPEAKER_00: particularly in AI and crypto world,
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SPEAKER_00: have rocketed upwards in the last year,
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SPEAKER_00: mostly on a vibe and a sugar high,
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SPEAKER_00: rather than on any kind of commercial reality.
4:59
SPEAKER_00: Now financial markets have finally been forced to admit what was frankly obvious to
5:04
SPEAKER_00: anyone who'd been paying attention.
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SPEAKER_00: that the fully priced in absolute perfection of never-ending economic growth,
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SPEAKER_00: continually explosive earnings,
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SPEAKER_00: guaranteed AI riches for all,
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SPEAKER_00: and relatively tranquil geopolitics does not exactly correspond to what we are
5:25
SPEAKER_00: experiencing right now.
5:28
SPEAKER_00: That disconnect is starting to be corrected by these violent mini crashes and subsequent rebuilds.
5:34
SPEAKER_00: And that's a good thing in the long term,
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SPEAKER_00: as it solidifies the foundation of future stock price rallies and increases the
5:42
SPEAKER_00: likelihood that they could be sustainable and long lasting.
5:47
SPEAKER_00: One last thing.
5:48
SPEAKER_00: To be clear, heavily falling markets are a feature of investing for your future, not a bug.
5:56
SPEAKER_00: They are going to happen frequently over your investing timeline.
6:00
SPEAKER_00: For those with longer time horizons,
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SPEAKER_00: 10,
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SPEAKER_00: 15,
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SPEAKER_00: 20 years or multiple decades,
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SPEAKER_00: these moves provide delicious opportunities to buy equities through ETFs at lowered prices.
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SPEAKER_00: And this weekly report is absolutely not intended to shake such investors out of their stock positions.
6:21
SPEAKER_00: Quite the opposite.
6:23
SPEAKER_00: Stock markets have never,
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SPEAKER_00: ever failed to subsequently rally back to new all-time highs following any steep declines.
6:33
SPEAKER_00: There's no reason to think that's ever going to change.
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SPEAKER_00: Just keep buying for the longer term.