Weekly Report | Winter is Coming

NEGATIVE FEELING IS TAMINING THE BULLS.

With each passing week, market positivists are slowly being taken over, shifting their positions and converging on a general feeling of pessimism. In addition to the current war spreading in Eastern Europe, there are also strong inflationary issues: caused mainly by the historic issuance of money by Central Banks; by the excessive cost of metallic, agricultural and energy commodities; and ending with the very low interest rate. The whole context, before pandemic, is heading the entire planet towards a sharp recession.

The image above shows that investor sentiment (Blue Circles) is going along with this recessionary forecast, driving pessimism at points as deep as the levels of major crash of the last few decades.

CASH KING!

Mutual fund cash level is the total percentage of a mutual fund’s cash assets.

“Remember, the FMS cash rule works as follows: when the average cash balance rises above 4.5%, a counter buy signal for stocks. When the cash balance drops below 3.5%, a counter sell signal is generated.”

Note that the FMS is already at about 6%! Compared to the most recessive levels since 1999.

Source: Click Here!

Goldman Sachs: Level EPS

Goldman Sachs is already adjusting, and forecasting, that the S&P 500’s profitable exposure is likely to be underwhelming, contrary to prevailing expectations. The Red Arrow indicates the estimated S&P 500 yield for December 2022 at approximately 4150 points.

INCREASING PESSIMISM

Notice how the pessimistic alignment is accentuated: the Red Circles demonstrate the negative expectations regarding the growth of the US economy; hitting targets as low as in the worst crises identified since 1994.

The same information with a smaller perspective, since 2008. A Dark Blue Line still allows us to determine that even with such high expectations of recession, there is still a lot of allocation in the markets. In other words, we haven’t reached the maximum level of panic yet!

A shorter sentiment indicator keeps us on the lookout for the “softer” level investors are at. Your positions in the market are absolutely more cautious.

ENERGY PERSPECTIVE RECESSION

A Blue Line demonstrates the history, since 1986, of the maximum level of prices for a barrel of crude oil (Brent), characterized by a marked process of economic recession (Gray Belt). Even at this moment, in March 2022, the price of Brent reached new highs, surpassing $130 dollars. The image above is still lagging behind the price reached, but it already informs us that the price has reached absolutely high levels. At the time of writing, Brent has already dropped to $98 dollars.

Please note that during the c0vid crash the price of Brent Oil reached historical lows, mainly due to of all economic closure managed by world governments.

Year 2020: Lockdown + Commodities at Minimum Prices + Economic Closing + Monetary Printing + Negative Interest Rates + Extreme Demand = Future hyperinflation.

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Every time there was a inversion in the curve, touching the “0 point” and moving to the negative base, the recessions arrived (Red Stripe).

However, IF EVERY TIME THERE IS A REASON TO SELL BECAUSE OF THE NEWS AND CRISIS, YOU WILL NEVER GET CONSISTENT RETURNS.

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