The only thing that mattered in 2019 was that the markets were intent on crucifying anyone who didn't fall in line with any number of bullish themes that could have been adopted by many but were only embraced by a few.
All of the seemingly sophisticated economic statistics, the geopolitical analysis, the earnings analysis that kept pointing to recession more times than we could count....all of it was a pile of deodorized garbage meant for mass consumption via the tried and true method of instilling fear through relatable concerns.
Now that those concerns have been pummeled into oblivion we are left with a market that is steadily increasing in value via a QE induced frenzy that is forcing even the most rigid imbeciles among us to acknowledge the futility of fighting the underlying euphoric trend.
With this shift in psychology comes an entirely new set of dynamics that investors must be prepared for in the months to come:
- With a warm, confident embrace of everything that is good in the markets comes the cutting away of the safety net should heartbreak ensue. Any negative surprises will be amplified moving forward.
- Confidence in the equities will be expressed via volatility suppression. What we are experiencing currently in the market with very little in the way of volatility while dips are calmly devoured will be the path forward in this bull market.
- When volatility begins to increase via daily and weekly range expansions in the major averages this will be a signal that long exposure should be trimmed, hedged and protected as best as possible.
- Over the next couple of quarters earnings will be a cake walk for companies that used a majority of 2019 as an exercise in dampening expectations. Those expectations are set to increase in Q1 and Q2, setting up the second half of 2020 to be a large hairball for the markets when paired with what will surely be an insane election period.
- There is zero nobility in attempting to get bearish on this market early. While bearish opinions about future expectations for this market past Q2 should be considered, acting on them early will be an exercise in compound return negation. Be patient bears, your time is coming. This isn't 2019 where the entire year will a torturous affair.
2020 is miles apart from 2019 for investors....it's just that nobody realizes just how different it is quite yet.
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