Change the trading strategy the intrinsic value of US stocks has changed
The decline in us stocks in the past two days has eased a little, but the VIX, a panic index that measures the degree of market panic, has risen sharply. Downside risks to profit margins are intensifying, equity valuations are not cheap, and there is a growing risk that the Fed will over-tighten monetary policy. In general, the logic of the main line of decline in this cycle is very clear. Because the intrinsic value of the stock has changed.
Everyone should remember the slump that night after the CPI data was released last week. The CPI growth in May remained at a high level. Just yesterday, the Federal Reserve announced a 75 basis point increase in interest rates. This is the largest single increase in many years. interest.
However, by raising interest rates to control inflation, while reducing the money supply, the side effect is to push up the risk-free interest rate of the market. When the market enters such an interest rate hike cycle, the exchange rate of the US dollar will rise, so it seems to be a good choice to hold the US dollar now. Most of the bond yields continue to rise, and most cryptocurrencies and commodities are falling.
According to relatively pessimistic expectations, if the yield on the subsequent 10-year US Treasury bond rises to 4.0%, then the S&P 500 price-earnings ratio still has about 15% room to fall
Green Candle Investments's avatar
I believe short term moves should not effect long term strategy, unless you're a trader of course. I think the growth strategy has been excellent for the past decade, but now the value investing fundamentals may prevail.
Jonathan Garcia's avatar
@greencandleit some say, Cathie Wood, that growth is in deep value territory right now. Thoughts?
Green Candle Investments's avatar
@toasty_trading i'm not so sure i subscribe to that theory. a lot of growth companies have yet to make a profit and i think in a time where capital will be more difficult to acquire, it will in turn hurt those growth companies even more than value companies.
Jonathan Garcia's avatar
@greencandleit yeah I hear you. capital will likely be hard to acquire. Thanks for the insight!
seria_kirmin's avatar
@toasty_trading Capital is profit seeking and greedy, they don't make money-losing trades