Good Afternoon,

This is going to sound off to some – maybe – but I can always tell when the crowd is getting too close to the flame so to speak.  The noise picks up.  The “experts” shout even louder. The complex scenarios being hurtled about become more “assured” and set in stone as the fear rises everywhere – even for the professionals.

Now the NAAIM

We shared this data with you last week.  This week we have covered the internals showing significant levels of fear, we showed the AAII and the Fear and Greed.  Heck we even included the options avalanche as more of the public runs to “get short.”

I thought you would enjoy this NAAIM update – only because the pros, well, got even MORE scared.

…read ’em and reap

 

Remember, there are two data points here:  The percentage of equity exposure by professional fund and institutional managers, and then, underneath – the S&P 500.  The time span is 2 years – inclusive of the pandemic, the shutdown and the aftermath.

The exposure is down to 52% – meaning they are almost half out of the market.  LOL.  More important?  I have taken the liberty of highlighting the other times where the lows were set in this region of exposure.  Interestingly, there are only two levels lower than now – and one of those was the pandemic shutdown.  

Points to Consider

Current levels of equity exposure are now equal to those levels seen just three weeks into the complete global shutdown!

Is it really that bad?

Each low level of expose before in this region (purple arrows) were all very close to significant lows – and ALL mark prices lower than we are now overall.  Interesting, no?

You bet it is.

Can it go lower?  You bet.

Can Omicron get scarier?  Count on it.

Will the news get worse?  Absolutely.

Is there a bigger monster next?  Without a doubt.

But here is the deal….

Watch the green line in the lower half of the data.  It has LOTS of ups and downs.  Many weeks sprinkled in there were – well – more than ugly.  There were many months that all felt terrible…but

…and this is a big but:  the trend overall is upward!

Even in a pandemic

Even in a supply-chain interruption, re-design and rebuild

Even in the middle of the political nightmares being exchanged

Even in the exhausting list of things “we should worry about” we are told

Even in the loss – and then regaining of millions of displaced workers

Even as we are told to fear rate increases

Even as we are told to fear inflation

I could go on – but I hope the point is made.

There are vast and powerful forces driving us forward – which almost no one is covering, other than here – for you. : )

These forces have more than proven themselves.  We just need to accept them as they will “be around” for the next 3 decades.  It is admittedly tough to keep that horizon in focus when the mob wants to terrify you with a never-ending array of fears – but, alas, focus we must.

The Barbell Economy® is Rea

 

Then new industries expanding our lives, our reach and the impact we can have are exploding

 

Here is the tough part:  Fear and Faith ask of us the very same thing:  we must believe something we cannot yet see.

Earnings Stay Strong

It is not just personal & household wealth which have recently hit new all-time highs, the corporate world has never been this healthy either.  We noted about 10 days ago that the normal process of paring back earnings expectations just before a quarter begins had begun – and now, it is already ticking back up.

Keep in mind the chop is the living out “of the fear of inflation killing earnings.”  Note we have been told this since March of this year – this even as rates have fallen almost 30 basis points since their peaks in March.

A year from now, inflation will not be the concern of the hour.  And earnings?  They are set to continue to be better than expected more often than not.  Notice the 19.0% expected growth has already ticked back up to 19.3% – a very early sign that inflation is not doing all the damage you are being told to fear it is doing

 

We expect more surprises.

Also – with Q3 fully in the books, let’s look at how it all settled out – and how much of an increase that end result was from where we were at the start of the Q3 season

 

Q3 ended with over 41% net earnings growth and over 17% revenue growth.  Both excellent numbers.  But, keep in mind, when the season began, they were “expected to be just “26% and 9.5%” respectively – both also solid numbers.  However, when we are speaking of hundreds of billions of dollars a quarter, these “misses” are significant.

Investing is No Walk in The Park

It was never designed to be easy.  Nature does not provide rewards without getting through storms.  It is our interpretation of items that we must clarify and solidify in our minds – to not be swayed by windows like these last few weeks.  You can be absolutely argued more are coming – and we will be here during every single one of them to keep us all on our pathway, even when it hurts.

Lessons are many but that first chart above has a boatload of them in just one snapshot.  The main lesson – living through the storms along the way is the ONLY way to capture the full rewards of your investment planning.

I’d like you to consider this:  think of this number:   14.

Why 14?  If the S&P 500 were to close for the week right where it is now, there will have been a total of just 14 daily closes that were higher than right now, in all of market history.

Granted, that’s a large part TECH – but the point is this:  fear is everywhere and yet – we are 3-5% off all-time highs after a choppy few weeks.

Take this all in my friend – enjoy the Holiday Season – our best years are ahead…for far longer than most remotely understand.

Remember, pay attention to the underlying current – not the waves in the storms.

Buckle up, tighten those belts and hold on to your popcorn.  This ride is just getting started.

 

Until we see you again, may your journey be grand

and your legacy significant.