4. Rate Hikes: This chart shows the “A/D Line“ for central banks (cumulative sum of net amount of rate cuts minus rate hikes). Basically if it is going up then more central banks are cutting rates, and if it is going down then more central banks are hiking rates. As you might expect, the market echoes its movements, and apparently the market seems to follow with a lag, which makes sense (i.e. in terms of leads/lags of monetary policy transmission).
My take: don’t overthink it, you can either swim with the tide or try to swim against the tide… and right now it is a tsunami of rate hikes.
10. ETF Strategies Performance post-Launch: According to a study, thematic strategies have a habit of underperforming post-ETF launch (might say they are good at picking the top—easiest time to raise AUM is when a strategy/style/sector is hot).
BONUS CHART >> got to include a goody for the goodies who subscribed.
Investor Sentiment vs Positioning: As noted , investor sentiment has crashed to levels last seen in 2008. But this time we compare it to investor *positioning*.
Basically, while investors *say* they are extremely bearish, their portfolio allocations appear to tell otherwise: investor allocations to equities remain near the top end of the range. Hodl has come to the stock market?
There have been a few times where sentiment has become quite disconnected from positioning, in some cases it ended up being simply hysteria. But in other cases it ended up basically being early… Or said differently: sentiment reacts immediately, while positioning moves more slowly.
Probably what is needed to move the black line is an actual fall in the PMI below 50, disappointing earnings, and more proof that the Fed means business in terms of taking the punchbowl away and driving toward a soft landing.
The other thing is bonds are still being bludgeoned. That makes portfolio allocations to stocks vs bonds a little muddy. So in that respect, what is likely also needed is a bottom in bonds (which would likely come when it is clear that the economy is turning down and perhaps when the Fed is a bit more progressed).
Finally though, it should be said, one potential implication of this chart is that there could still be a lot of selling yet to come.