Market Note
Party like it's 1999?
Source: Koyfin
As market participants contemplate where we are in the cycle, reviewing market price action in the late 1990s is instructive. After the Fed bailed out LTCM in 1998, a strong, orderly rally followed. Then, from October 1999 to March 2000, the Nasdaq doubled in a ferocious speculative rally. If history is any guide, we might need to buckle up as valuations for the most speculative corners of the market enter the stratosphere. A stark difference now is that the Fed is easing, whereas in 1999 it was hiking to quash animal spirits.
Market Spotlight: US Labor Market Weakness
Source: Labor Department
The bullish consensus is that a weakening labor market will support lower US rates, while corporates benefit from the growing leverage of capital versus labor. As this trend unfolds, some argue the US populace is pushed to more desperate measures to make ends meet, such as bidding up revenue-less concept stocks to eye-watering valuations. Meme stock chatboards are sadly filled with personal stories of traders using profits from short squeezes to pay for living expenses.
Market Spotlight: A Complete Breakfast?
Source: FactSet
Shorting packaged foods is a common trade in hedge fund manager portfolios. These consumer goods products make for well-behaving shorts as there is a general consensus that their offerings are growing antiquated, diminishing short squeeze risks. The trade has worked year-to-date as established players face increasing competition from new entrants, margin pressures, and consumer trends shifting towards healthier diets.
Market Spotlight: Shorting Pet Rocks
Sometimes taking the other side of the meme stock craze feels like trying to short Pet Rocks. The craze was a short-lived but wildly successful fad in 1975, showing how powerful marketing and humor could turn a mundane object into a multi-million-dollar success. The fad faded quickly, but its story remains a classic example of American pop culture, serving as a cautionary tale for modern-day consumer trends.
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Contact UsDisclaimer: This material has been prepared by MASTERPIECE ADVISORS for informational purposes only and should not be construed as financial advice. Investments in hedge funds are speculative and involve a high of risk. This material is confidential and may not be disclosed without the express written approval of MASTERPIECE ADVISORS.