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Markets Begin to See Light at the End of the Tunnel

www.investing.com/analysis/markets-begin-to-see-light-at-the-end-of-the-tunnel-200633059
Markets Begin to See Light at the End of the Tunnel
By Francesco Casarella/Investing.com   |  Dec 02, 2022 11:54AM ET
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  • While it is still early to call an end to the bear market, there may be light at the end of the tunnel
  • At this stage, the key is to focus on what is yet to be priced in rather than on what has already been priced in
  • Still, investors must stay calm and avoid embarking on market euphoria

It remains too early to call victory, but clearly, we are beginning to see that famous "light at the end of the tunnel" that I talked about in the past months amid the bear market.

At the peak of investor desperation, with markets at -25/30%, I suggested focusing on what could still happen instead of what had already happened.

But investors, you know, often chase the headline that blows the loudest or the prophet on duty who does a better job at riding the momentum (easy to be bearish with markets at -30%, you definitely get more consensus).

When we invest our money in the markets, we should never do so by analyzing what happened in the past, but instead we should analyze what the market is actually pricing today and what it has yet to be priced in. I have been repeating this concept a lot this year, but let's review it together.

Already priced in:

Yet to be priced in:

  • End of Russia-Ukraine conflict
  • Soft landing
  • Softer rate hikes
  • Resilient earnings
  • Inflation rising again

Get the picture?

So in the second list, except for a possible inflation surprise (which may prove more resilient than expected), all other factors lead to improvements in the current scenario and, as such, can positively affect prices.

The most concrete example happened Wednesday, when Powell said: "Moderating the pace of rate increases may come as soon as the December meeting," adding that the Fed's monetary policy was approaching "the level of restraint that will be sufficient to bring inflation down."

Powell simply stated that the December hike would be 50 basis points and, with less aggressive hikes, the recession could trend to a soft scenario.

So once again, let's try to understand how markets work and remember the usual trivial but fundamental rules that I won't mention again because you know them by now.

Bull/Bear, Put/Call Ratios
Bull/Bear, Put/Call Ratios

Source: Yardeni.com

Five years from now, or ten years from now, we won't even remember this moment anymore; what will remain will be the patient and wise purchases made in the moments of greatest panic, with the most discounted values.

I still don't know how my 2022 in the markets will end, I will update you in late December here, but in any case, in the end, it will be just another year (for me). For someone else, it will instead be yet another missed opportunity.

Until next time!

Disclosure: The author is long on the S&P 500.

Markets Begin to See Light at the End of the Tunnel
 

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Markets Begin to See Light at the End of the Tunnel

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Comments (21)
NaturalGas Speculator
ForeverOPEChater Dec 04, 2022 6:13PM ET
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the only thing is price in is delusion FED pivot and ignore anything else. it will hurt your pocket. Lets see who will be right. Shorting from today.
NaturalGas Speculator
ForeverOPEChater Dec 04, 2022 6:12PM ET
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weaker earnings? price in? tell me you know nothing without telling me you dont know.
NaturalGas Speculator
ForeverOPEChater Dec 04, 2022 6:12PM ET
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saving your comment just in case if you delete it.
Gideon Strassmann
Gideon Strassmann Dec 04, 2022 9:46AM ET
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it's the opposite. the tunnel at the end of the light
Miriam Vilensky
Miriam Vilensky Dec 03, 2022 9:30PM ET
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And what happens if the war between Ukrainian and Russia spreads?? What happens if Europe will decide to interfere? You certainly gave your opinion and made quite a fool out of yourself… take care. Oh And start buying some puts…
Mitlesh Ray
Mitlesh Ray Dec 03, 2022 6:16PM ET
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raghit
Ben Bigs
Ben Bigs Dec 03, 2022 2:59PM ET
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Certified crash on Monday
Chris Lamnidis
Chris Lamnidis Dec 03, 2022 3:58AM ET
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Earnings not priced in
Ogo Pogo
Ogo Pogo Dec 03, 2022 3:41AM ET
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Naive and binary thinking
Bruce Peck
Bruce Peck Dec 03, 2022 2:17AM ET
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Sounds like Hope-ium
Steve Bucher
Steve Bucher Dec 03, 2022 12:49AM ET
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Obviously, your view is very bullish. Let us know how it all worked out next year when inflation is higher than currently and rising.
 
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