As we are now roughly four months into this rally, a recognition needs to take place of a leveling up in the difficulty of extracting gains from this market.
November - March was relatively easy.
The opportunities have been boundless, from NVDA to crypto, in this relatively narrow bull market, it simply took a recognition that momentum was working and every other piece of analysis offered up offers little value, whether macro related, fundamental valuation analysis or otherwise.
Save your moral hazard based, overly intellectualized bearish arguments for college economics class, as the only thing that matters in the markets is capturing gains while they are available.
With that said, it is important to understand that with the easy money more than likely behind us, there will be numerous curve balls to come during Q2, as we quickly approach April.
It begins with the Fed next week, with what is likely to be a continued resurgence in inflation as PPI will show tomorrow, and as a result Powell getting caught between a rock and a hard place, having to walk back, ever so slightly, his recent dovish stance.
The market is not prepared for even the slightest hawkish results out of the Fed next week. There are no hedges. The bears have largely been forced to capitulate.
In other words, there is a lot of hollow ground beneath the market should things begin to turn sour.
Ultimately, any weakness will more than likely be a buying opportunity for those with dry powder.
Our current allocation here at Zenolytics allows us the luxury to take advantage of what is likely a difficult period ahead, while nearly everyone is expecting smooth sailing a la November - March.
The game is going to change in Q2. We are about to get an early preview of the changes to come during the second half of March.
Strap in.
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