It's Time To Pay Attention - Crude Oil + SPX
The last time stocks and oil prices started performing like this for months on end was prior to the 2008 financial crisis. If Oil prices have already topped, does this mean a precipitous decline is soon to come? Or, will markets simply shake this off? Not so sure. Inflation encourages people to return to the workforce, and even work multiple jobs to stay afloat. Will this be enough, and will things just sort themselves out? The yield curve just inverted, yet many investors are still assuming there's more upside to be hard, even if a recession is on the horizon. Just as I'm not so sure, the market doesn't appear to be so sure either. This is a uniquely confusing environment. So, what do??
Zoomed in, you can see that as Oil rose in 2008, markets had already topped out. The stock market decline only accelerated once Oil itself topped out. Once oil bottomed, that was when stocks finally reversed back to the upside:
Zoomed in during the present, this is what could happen if history repeated almost exactly. Things are unlikely to play out this way, but this is all speculative anyway. I find this pretty interesting:
Another question - will Gold continue to hold as a market hedge in this environment. Looking back to 2008, Gold performed against the market as it declined. Once Oil topped, Gold declined initially with stocks but then recovered and broke out much faster:
Present day with speculative trajectory:
What's also relevant to note is that cryptocurrencies have NOT been correlated with Gold, but with traditional markets. This presents evidence to show that Bitcoin is not operating as a safe haven asset, while Gold is performing how it has in the past.
We could be catching the market at a moment of complacency. Things seem to be shifting in a positive direction in Ukraine. Biden has unlocked oil supply reserves to keep prices low in the US. COVID seems to be having less of an emotional grip on certain populations. Stocks have roared back, memes are printing, Ethereum is gonna hit 10k; markets are invincible. Not even nuclear war could send them spiraling, right? Well....history tells us that things can turn at any moment, and it doesn't have to be the result of a particular event. Eventually, put society through enough stress and something has to give.
A volatile, uncertain market increases the probability of rash, irrational decision-making.
Linked below are some of my previous posts that present some thoughtful, in-depth analysis on the potential asset/debt bubble.
Call me a permabear, but I'm really not anti-growth. I'm also not completely anti-capitalist, as I think people need to be able to exchange goods and services in order for society to sustain. But I AM anti-neoliberalism, which is a certain KIND of capitalism that encourages exploitation, and it does not make the assumption that all participants are useful.
Not gonna lie, things have gotten better over the 20th century in terms of our average quality of life. But since things have changed so quickly, and out biology/emotions have yet to adapt....I think we're headed to a pretty dark place if we cannot take a pause and slow down. If anything, I don't think we can see healthy growth for humanity into the remainder of the 21st century without a re-evaluation of our priorities. And I do not think this is possible without a major market shift. If markets really take a turn for the worse - meaning a multi-year bear market - what does the government do? Many people's retirement accounts will be wiped out, so who do they turn to? They must inevitably tax the wealthy and corporations quite heavily, if they want the society to begin a new broader economic cycle and start over again. We've seen these before. The wealthy are the ones who need to invest in the future, rather than hoarding.
This is just my opinion, and should not be taken as financial advice.
-Victor Cobra
Zoomed in, you can see that as Oil rose in 2008, markets had already topped out. The stock market decline only accelerated once Oil itself topped out. Once oil bottomed, that was when stocks finally reversed back to the upside:
Zoomed in during the present, this is what could happen if history repeated almost exactly. Things are unlikely to play out this way, but this is all speculative anyway. I find this pretty interesting:
Another question - will Gold continue to hold as a market hedge in this environment. Looking back to 2008, Gold performed against the market as it declined. Once Oil topped, Gold declined initially with stocks but then recovered and broke out much faster:
Present day with speculative trajectory:
What's also relevant to note is that cryptocurrencies have NOT been correlated with Gold, but with traditional markets. This presents evidence to show that Bitcoin is not operating as a safe haven asset, while Gold is performing how it has in the past.
We could be catching the market at a moment of complacency. Things seem to be shifting in a positive direction in Ukraine. Biden has unlocked oil supply reserves to keep prices low in the US. COVID seems to be having less of an emotional grip on certain populations. Stocks have roared back, memes are printing, Ethereum is gonna hit 10k; markets are invincible. Not even nuclear war could send them spiraling, right? Well....history tells us that things can turn at any moment, and it doesn't have to be the result of a particular event. Eventually, put society through enough stress and something has to give.
A volatile, uncertain market increases the probability of rash, irrational decision-making.
Linked below are some of my previous posts that present some thoughtful, in-depth analysis on the potential asset/debt bubble.
Call me a permabear, but I'm really not anti-growth. I'm also not completely anti-capitalist, as I think people need to be able to exchange goods and services in order for society to sustain. But I AM anti-neoliberalism, which is a certain KIND of capitalism that encourages exploitation, and it does not make the assumption that all participants are useful.
Not gonna lie, things have gotten better over the 20th century in terms of our average quality of life. But since things have changed so quickly, and out biology/emotions have yet to adapt....I think we're headed to a pretty dark place if we cannot take a pause and slow down. If anything, I don't think we can see healthy growth for humanity into the remainder of the 21st century without a re-evaluation of our priorities. And I do not think this is possible without a major market shift. If markets really take a turn for the worse - meaning a multi-year bear market - what does the government do? Many people's retirement accounts will be wiped out, so who do they turn to? They must inevitably tax the wealthy and corporations quite heavily, if they want the society to begin a new broader economic cycle and start over again. We've seen these before. The wealthy are the ones who need to invest in the future, rather than hoarding.
This is just my opinion, and should not be taken as financial advice.
-Victor Cobra
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