What follows are the topics covered in this weekend's note to subscribers. To become a client of Zenolytics Turning Points or to learn more click here.
What follows is an excerpt from this weekend's 180th Edition of Zenolytics Turning Points:
MARKET UPDATE
With the new year comes the tradition of forecasts for the year ahead that are typically based on both recent past performance and some measure of distant historical precedent.
While many are attempting to handicap 2021, to do so demonstrates either a certain degree of arrogance or ignorance as we are moving into a terrain that is alien to all of us.
What has occurred since the virus crisis in March and the resulting massive stimulus measures, whether fiscal or monetary, has been an acceleration of dynamics that should have taken 5-10 years to properly prepare for and digest. This has forced a great amount of stress on both societies and economies globally.
We are seeing that stress expressed through the great amount of social unrest, mostly aimed at governments, whether with respect to economic inequality or lock down measures that are seen as unnecessary or abusive in nature.
We are also seeing that stress expressed through massive volatility across numerous asset classes that have primarily taken the direction of upside in everything from small-cap stocks, cryptos and even sports memorabilia is seeing values inflate as endless amounts of capital seek a home away from cash.
This stress induced appreciation of asset prices, forced by what is essentially the destruction of cash as an asset class, is a volatility enhancing event. “Volatility enhancing” is likely not a powerful enough term to properly classify what is occurring presently, however.
What we have seen occur in asset prices, induced by governments being forced to destroy their monetary base, is the beginning of a volatility explosion that will be both deceptive and ultimately, destructive in nature.
The only forecast for 2021 that has any chance of being accurate then is that it will be a year where the forces of volatility will become even pronounced, taking the form of both upside and downside volatility that can be potentially historic in nature.
Our job as investors is to first and foremost, protect capital in such an environment. And secondly, to capitalize on this volatility to the best of our ability.
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