The liquidity wave is still alive and well
Chief Economist & Fund Manager
As we have said many times over the past several months, while the market as a whole is not in bubble territory, many parts of the market are. In particular, the technology sector is as expensive as I have ever seen.
In fact, one of my worries has been that when the technology sector did correct, it might bring down the entire market. The good news is that this has not happened, and the market overall is holding up.
This in my mind means two things. The first is that the bull market is still intact. The second is that the rotation we have been seeing over the past several months seems to be enough (at least for now) to prevent a general market correction, even as many of the high-flying technology names correct or do nothing.
Also, the fact that the high PE and High Price/Sales stocks are correcting , should also bring down the market multiple over the next few quarters, which is a good thing.
This in turn should be good for active managed portfolios and less for passive portfolios or passive investment instruments.
Finally, this also means the liquidity wave we have been riding since the beginning of the pandemic is alive and well, but investors have to change strategy and find new winners.
Like the old wall street saying goes, never fight the Fed or never fight the central bank as I say. And with the Fed still purchasing 120 billion in assets every month, this liquidity wave is still alive and well.
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