The Friction Between Bulls And Bears – ValueWalk Premium
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The Friction Between Bulls And Bears

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Q2 hedge fund letters, conference, scoops etc

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We're in a transition period from a bull to a bear market and from an economic expansion to a contraction (recession). Anyone who denies this is either ill-informed or a perma-bull. Or both.

Where do you stand at this important crossroad in market history? Are you a bull? Are you a bear? Where are you getting the information that supports your view? And how confident are you in that view?

These aren't idle questions. These are the questions every investor should be answering if they are serious about reaching financial security and independence with at least some help from their investments.

I'm going to lay out the bull and the bear case. You can decide which is more compelling. Personally, I'm a nervous bull who is sitting on 35% cash and watching every development in the market and the economy as this transition unfolds.

The bull case

  1. The Trump put

The belief that President Trump won't allow the market to crash or the economy to tip over before he gets re-elected in 2020. He's got too much to lose, and he will stop at nothing to keep the financial markets healthy and growing.

“Trump was effective in helping the markets when it came to tax policy in 2017 and now in coming to an agreement with China,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “Every time he talks about talks going well with China, that’s what the markets want to hear. If he says something good, the markets are going to rally.”

This argument has widespread appeal, but a closer look reveals some problems. Not only does Trump lack the tools to make this happen, his policies are putting even more pressure on the market and the economy. Tariffs are one example of this.

  1. The Fed put

The widespread belief that the Fed will not allow a recession or bear market to happen on Powell's watch. What tools are available to the Fed for this purpose? Cutting rates, printing money, and using that money to support market prices (indirectly – the Fed can't buy stocks like China and Japan can).

  1. The trade war put

The belief that President Trump, master negotiator that he is, will prevail over Xi in the worsening trade war. When that happens, the economy and stock market will rocket higher and money and jobs will come pouring into the U.S. from China. This scenario may not unfold. It could go the other way.

Read the full article here by Erik Conley, Advisor Perspectives

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