SPY Monthly closing in on capitulation & generational buying opp
Take a look at the trend on Chaikin Money Flow. Look back over 20+ years. Back at the end of 2015, start of 2016, the market reversed upwards. What was the catalyst? Hint: slickly in the news again now. Cheap oil stimulated a recovery that then ran into tax cuts a year later.
As boomers age that causes a lot of money to come out of stocks. Not only do Boomers sell, but more importantly, their pensions are in perpetual draw down as there are few to no new younger contributors. So, pensions must be cautious on stocks. There was noise recently from JP Morgan that pensions would rotate back into stocks. That's true to an extent, they could dial up exposure by 5% or 10%, but that money would come back out on a small bull market.
With the new Infinite QE and fiscal policy, money supply will increase. Oil being cheap probably forever will also be good for the economy at least. On the flip side we have a massive hit to corporate stock buybacks that could last until 2022 or 2023. Given that buybacks were the marginal buyer in the market - that is, the only net demand - that does not bode well for stocks. You must find companies that have cash to continue buybacks or at least not slash dividends. Many companies will slash dividends this year.
Always remember, demographics is destiny. It will be very hard to overcome freaked Boomers who were already in draw down. Soon, the stock market will become more bifurcated with low/no growth companies with high debt in a world of zombieland hurt.
As boomers age that causes a lot of money to come out of stocks. Not only do Boomers sell, but more importantly, their pensions are in perpetual draw down as there are few to no new younger contributors. So, pensions must be cautious on stocks. There was noise recently from JP Morgan that pensions would rotate back into stocks. That's true to an extent, they could dial up exposure by 5% or 10%, but that money would come back out on a small bull market.
With the new Infinite QE and fiscal policy, money supply will increase. Oil being cheap probably forever will also be good for the economy at least. On the flip side we have a massive hit to corporate stock buybacks that could last until 2022 or 2023. Given that buybacks were the marginal buyer in the market - that is, the only net demand - that does not bode well for stocks. You must find companies that have cash to continue buybacks or at least not slash dividends. Many companies will slash dividends this year.
Always remember, demographics is destiny. It will be very hard to overcome freaked Boomers who were already in draw down. Soon, the stock market will become more bifurcated with low/no growth companies with high debt in a world of zombieland hurt.
Comment:
and the market rallied from this area with only a couple small pullbacks. The zombies are still zombies. As the world normalizes, it will become harder to find value as there are many value traps. Focus on the mid cap leaders that can crash the S&P in coming years. We use a barbell approach focused on tech and companies that use tech well on one side, and resources on the other side, i.e. gold, real estate, and a little Bitcoin as a currency hedge, not a stock substitute.