I’m out of the market… again.
Last week my portfolio started to malfunction and not to put a fine point on it, I lost way more money in a day than the broad market suggested I should. Over the years this has always preceded a crash for me. I sold everything apart from three special situations and am not 80% cash.
I didn’t write this up at the time because when it comes to crashes you simply cant be sure you are going to have one and while its cheap to sell these days and re-enter at leisure I don’t like to imagine I’m always going to be right.
After a week I’m very comfortable being in cash and sitting watching what happens next.
As far as I can see the market is broken in the UK and US. US valuations are way too high, even without the economic fiasco underway and the UK’s market structure appears at best to be broken in many places.
I’m not going to play ball in a mine field.
I think we have begin the next instalment of the Covid crash and we will get it in the lead up to the US Presidential election. If we do not then we will get it soon after. If its February and we haven’t crashed I might clamber out of my bunker but even, then maybe not.
I really do not want to be in cash because I do think inflation will get traction soon enough, but this ‘correction’/crash will come fast and hard and I don’t want to get crushed under it.
The S&P 500 chart is enough for me to want out.
The Fed or the US government can levitate the market out of any fresh crash, but I do not see that as a certainty before the election which I believe will see, baring another election turn up, a Biden victory.
Trump has been the champion of the stock market for sure and his defeat could be enough in its own right to crash the market. However that is absolutely not necessary, the market is already on its was to a plunge as I see it.
The markets are high because of bailout and those bailout are in the short term coming to an end. Economic gravity will have its way.
So lets look at the UK stock market.
This is a deeply wounded economy and the situation is only getting worse.
It will be lucky if the coming bottom is not far below the first. What exactly is there happening to push the index up to previous highs when the reality of the situation is so bad no one cares to sketch the situations nadir which is far in the future, even without factoring in Brexit.
You don’t have to be a master chartist to draw these lines.
Or for that atter this one.
To me this comes from a US crash which will crush all markets and all instruments and I for one am trying very hard not to be under the window when that particular grand piano falls from it.
I sincerely hope to be proved wrong, but I prefer to hope with my capital safely in cash.
Smart asset allocation can wait till after.