Research Summary
The report discusses the overbought condition of the market in 2023, with fund managers being the most bullish since the start of 2022. It criticizes the Federal Reserve’s dovish stance and predicts a hard landing for Wall Street in 2024.
Key Takeaways
Overbought Market Conditions
- Market Overbought: The report states that the market is overbought on every metric, including momentum, breadth, and volume. This condition is expected to continue into 2024, despite the market’s precarious technical indicators.
Federal Reserve’s Dovish Stance
- Fed’s Dovish Pivot: The Federal Reserve has pivoted to a dovish stance with the market already fully overbought. This is the first time such a situation has occurred, leading to an over-lubricated and overheated market.
Historical Precedents
- Historical Parallels: The report draws parallels to the pre-pandemic conditions when the Federal Reserve had already pivoted and was using quantitative easing to address the “repo” crisis. It suggests that similar conditions are present now, leading to a potential market crash.
Performance of Tech Stocks
- Tech Stocks Performance: The report highlights that the FANG+ stocks are up 95% year-to-date, and the majority of fund managers remain long on tech stocks for 2024. This could indicate a potential bubble in the tech sector.
Prediction for 2024
- Hard Landing in 2024: The report predicts a hard landing for Wall Street in 2024, with extreme dislocation. It suggests that this will be the hardest landing since 1930.
Actionable Insights
- Monitor Market Conditions: Given the overbought condition of the market, it would be prudent to closely monitor market conditions and adjust investment strategies accordingly.
- Assess Tech Stocks: With the FANG+ stocks up 95% year-to-date and fund managers remaining long on tech stocks for 2024, it may be worth reassessing the valuation and growth prospects of these stocks.
- Consider Historical Precedents: The parallels drawn to the pre-pandemic conditions suggest that similar market dynamics could be at play. Investors should consider these historical precedents when making investment decisions.
