I meant to post this earlier but I've been tied up. The election was a disaster for the Democrats as they were soundly defeated including a sweep in all the swing states. In hindsight everything is 20/20 as they say, but there was some writing on the wall hinting that Trump was likely to win due to the global shift towards the election of right leaning governments. People are tired of heavy handed government regulations/laws which impinged on freedoms and tired of mass immigration. It all started with the COVID lockdowns and vaccine mandates. Add to this the woke movement in which you had this fringe minority able to get a loud voice. I'd argue that wokeism was more prevalent in the US and Canada vs most other countries. These past 2 years, I got a clear sense that people were really fed up with this nonsense and were rebelling against it...and rightfully so in my opinion. The democrats did not appreciate or recognize this shift towards the right. They should have shifted more towards the center. Also, having Kamala as their nominee didn't do them any favors. She didn't earn the right to be there and did not have enough carisma. Being a women and of colour probably worked against her too. The nasty, serial lying, convicted felon that is Trump did not deter enough people from voting for him even though he looks more unhinged than ever. Some smart people who voted for Trump like Bill Ackman downplayed Trump and his poor character by never mentioning it, emphasizing his team and the proposed policies of the Republican party. Imagine if you woke up from a 10 year coma and were asked who do you think would win a US president election a) a convicted felon or a b) a former district attorney? lol.
Leading up to the election night, the market had pulled back modestly. Recall in my previous post how I noticed the elevated VIX as a sign of hedging election uncertainty. I also mentioned that this tends to be wall of worry behavior which creates a coiled spring action once the uncertainty has been lifted. That's what ended up happening with extra emphasis given that prior to the election, a Republican victory would be viewed as bullish for the market given the 2016 "playbook". The big rally we got was accompanied by a big collapse in the VIX. We also saw crypto do a moonshot since Trump had been hyping btc. A lot of folks felt compelled to chase risk assets on all this Orange optimism. Count me out.
Prior to this moonshot, the market wasn't sufficiently oversold and cleansed of the excesses I had pointed out in my prior post. This post election rally reeks of emotion, fueled by hedges being dumped en masse. The other issue with this rally is the steep rise in yields. A prolonged trend of rising yields like this tends to eventually short-circuit an equities rally. Yields have been rising primarily due to inflation fears from proposed tariffs.
The message I have continues to be one of patience. Chasing the market after it had a knee-jerk, emotional response placing it in an overbought condition, already up massively YTD, accompanied by hostile yield trends, is simply a very poor risk/reward set up in the ST. I don't give a fuck if the market just keeps going higher. I will not have FOMO.
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