Rope a Dope Rally

by | Aug 21, 2022

Nothing rope-a-dopes investors like a good old fashioned bear market rally.

Between doubting the Federal Reserve’s resolve to fight inflation, hopes that inflation peaked, and wild but doubtful employment gains, the market had more than enough reason to ignore declining GDP figures and an inverted yield curve that absolutely screams recession.

From the lows in mid-June, the S&P rose 18% through Tuesday last week, marking the second 10%-plus rally since equities turned last December.

But a 10.1% annual consumer inflation print out of the U.K. and a 5.3% surge in German producer prices – that was just for July – reminded the market that surging costs will prove a headwind to consumption and investment for the foreseeable future. And this week’s central banking confab in Jackson Hole might just prove the perfect opportunity for the Fed to prove the market it really means it.

With all this up and down – down 18%, up 12%, down 21%, up 18% – fatigue sets in making subsequent down legs more severe. Eventually, something breaks (think Bear Stearns and Lehman) and fatigue fades to fear.

For traders, this volatility doesn’t have to be a burden, though. Through staying informed, sharing ideas, and testing the market with a lot of trades, you can turn apparent crisis into pure opportunity.

The help with the first, I’m assembling a Macro Book to help you parse the big picture data you need to see equity markets through a clear economic perspective. It’s still in the early phases of development but you can check it out here to see what’s driving those negative GDP prints creating so much debate around the meaning of “recession”.

To share ideas, four times a week I go live with members of the Prosperity Pub Community on Telegram to share and vet ideas that can profit no matter what direction the market is headed next. Anyone can join the Community. And you can do so at no charge.

Finally, to get plenty of trades to test the market you’re free to join my Daily Pick service. For just a few bucks a month, you get a trade a day. You can check it out here.

Think of all this as ways to energize your trading so you don’t succumb to market fatigue. Because, with the right tools, no market environment has to be a burden.

Think Free. Be Free. 

What to read next