Ok listen, obviously the 2022 October/December lows was the bottom of this bear market so far. The market sentiment was so bad in Fall 2022 that it seemed like what March 2009 must have felt like.
All the articles and media headlines I was reading in December were “The End of the U.S. Dollar”, “Stock Market Will Crash 50%”, and “Get Ready for the Worst Recession Since 2008”. It was max fear.
At the all time lows, it seemed like the market was pricing in the near 100% probability of a recession
We all know the market has skyrocketed since January of this year. In the past 6 to 7 months the narrative has flipped. If the market continues to pump towards all time highs the market will soon price in the 100% probability that a recession WON’T happen.
Just like with any two extremes the truth is most likely in the middle.
Historically, with everything that happened since the pandemic, there should have been a severe economic downturn. We’re kidding ourselves that this time is the exception.
What happened is that the media, YouTubers, and influencers were spreading fear for nearly two years that a recession was imminent. Recession fears were in the public’s mind so long that it affected consumer behavior, so there was a lot of cash on the sidelines. Companies preemptively spent over a year getting their balance sheets in order, tech companies especially had a lot of lay offs in 2022. All of this ensured that a severe recession was not going to happen, or at least not on time.
When everyone expects a recession it’s not going to happen
The worst, most severe recessions in history were the ones not enough people saw coming
What’s going to happen is as markets pump to all time highs, and when the media starts assuring people that the recession was cancelled, people are going to let their guard down and the greed will blind them to the risks. When not enough people are anticipating the recession anymore, that’s when the recession comes and wipes us all out.
Not sure if the market will reach new all lows worst than the Fall 2022, but it will still be stomach churning
The smart money in the market knows all this. It’s as if most of us haven’t learned out lesson from the bull market bubble of 2020/2021.
If you read this far then don’t fall for their trap. Protect yourself
Also, if you had cash lying around at the end of last year and you sold, you weren’t buying, or you weren’t at least interested in buying, then you should stick to index funds and stop buying individual stocks. You either overestimated your risk tolerance, or you have no conviction in what you own
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