Recession Looming and More Downside for S&P
Consumer sentiment all across the boards looks bad. Further pressure from the consumer could cause further downward pressure on stocks. As "wealth" gets destroyed from falls in equities markets consumers will feel "less wealthy," and as such the marginal propensity to consume will fall. This will lead to less consumption and further destruction of consumer demand. For those who are really feeling the pressure, further selling of equities could be the only way to subsidize further consumption on necessary goods.
sam stribling's avatar
@deerpointmacro the old negative feedback loop.. can’t wait lol
Deer Point Macro's avatar
@strib As bad as it sounds it’s badly needed. 900b in retail inflows into etfs and passive over the past 2 years more than last two decades combined. That’s all coming down now
sam stribling's avatar
@deerpointmacro don’t disagree.. but it still hurts 🤕
Deer Point Macro's avatar
@strib I’m a fixed income, credit, and rates guy so I know the pain 😂
Nathan Worden's avatar
That broad perspective is quite helpful for me— I way over-indexed into tech, and as much as things have fallen… they can still fall more. $900 billion inflows into ETFs and passive strategies over the last two years is a mind blowing number.
Deer Point Macro's avatar
@nathanworden sector rotation is always hard, can put a lot of strain on the portfolios. Think a good paper to read was the one done by Artemis capital. He has very interesting perspective on different asset classes you need within a portfolio, most asset classes are tied to some sort of area within the business cycle. Only way to hedge that is a completely uncorrelated asset class. Which in my opinion and also his is being long volatility (not Vix). That is because volatility options strategies are convexed on linear performance I.e. you loose on your equity you can 2-3x on your long vol strategy. I know that was lengthy but it is the only way to really hedge.
Nathan Worden's avatar
@deerpointmacro I need to read that— was it the "Volatility and the Alchemy of Risk" paper? Or another one of the research papers below?


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