Post FED Meeting Thoughts…
Our model is now moving its focus to the FED Balance sheet as that will probably be the most important factor for the remainder of the year. The reasoning is simple, we have been watching and measuring the balance sheet against the Nasdaq 100 for a long time, it was a big part of the bullish move starting in 2020 and was part of our bearish call on stocks in late 2021. (the two big points on the chart up to this point were 3/1/2020 and 12/1/2021). Now with the huge runup of NDX and the continuing decline in the balance sheet, it appears by around October 1 2023, the two lines could intersect. That was not good for tech stocks the last time these lines got close together.
Here is the chart that we have shown before, with the lines projected out to the end of the year.
The rollout of the effects of this phenomenon will potentially have big repercussions for interest rates, ie. putting pressure on rates as things unfold. As such we are probably right now looking at the highs for the year for working rates.
As to market positioning of the Climate Tech Model at this point..
Yesterday we saw the model cutting back on leverage, dropping from the 2.6 X during the wave over the past few months to 1.8 X yesterday. We will no doubt see the leverage continue to decline as the market rolls over, maybe even see a 1:1 ie, zero ratio, as we see the model get to a long Climate Tech stocks and short general market mix.