In this weekend's 406th edition of Turning Points we have a 16 page note discussing what small-cap weakness means for the market; Our recent rotation from small-cap to large cap growth; How the markets are setting up for Q4 earning season; The slow rolling nature of the market that will continue to keep investors off balance; A crypto supercycle.
What follows is a brief preview from this weekend's note:
BTC is the embodiment of the slow rolling nature of an asset class that has had a history of vertical ascents throwing investors off given the paradigm shift in price action.
We have multiple consolidations during this uptrend that take months to digest. The natural investor reaction has been and continues to be: BTC must be at a top.
We have a gradual ascent that refuses to go vertical. The natural investor reaction has been and continues to be: BTC must be at a top.
We have sharp pullbacks every now and then as we had in recent days. The natural investor reaction has been and continues to be: BTC must be at a top.
Let's assume for a second that I am right and this slow rolling price action continues for equities and crypto. What does this mean for the bull market in 2024 and beyond?
A slow bull market, especially in the face of all the macro and geopolitical anxiety investors have for 2024, will continue to be greeted as alien. The news flow will continue to grow dramatically more dire, especially as we head into elections this year. At the same time, assuming the markets continue their slow pace forward, investor psychology won't shift because it can't.
Why can't it? The markets aren't following the vertical ascent playbook so there must be something wrong will be the prevailing thought.
Followed very closely by “the geopolitical situation continues to deteriorate, and who knows how the US elections will turn out?”
A majority of investors will remain in cash or get in cash at the first sign of trouble as a result.
A majority of smart investors will see what the markets are up to, driving the markets persistently higher until after the elections when investors realize that none of the chaos they expected has come to pass. And even if some of it did, the markets didn't really care much, they just kept slow rolling their way forward.
This is how early stage resumptions of secular bull markets transpire. Lack of care, followed by disbelief, followed by some interest and then eventually turning into fear of missing out. We are still in the lack of care stage, with disbelief due to come when new highs are made in the weeks ahead.
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