What Will Be the Narrative for the Second Half of the Year?
Narrative vs. Sentiment
The narrative in world markets changes regularly. These narratives control market sentiment and essentially direction of price action within the markets.
Market narratives range from a global pandemic, war, skyrocketing inflation or interest rates, slowing economic data, recession fears, or even improving economic data. Instances like these occur on a regular basis, and they can change the direction in markets. Getting an early grasp of the changing narrative can pay off if you can catch it early enough.
A Change in Narrative
Sometimes, the narrative in the markets or market sentiment will last a year or more. Other times, sentiment will change quarterly or semi annually.
The bullish sentiment after the pandemic crash lasted almost two years. The bearish sentiment that followed, due to supply chain disruptions, skyrocketing interest rates, and a Russian war, lasted about a year. Now, the bullish sentiment that we are currently experiencing has so far lasted the entire first half of the year.
There were minor hickups due to banking fears and the occasional recession scare, but the market continues to climb
Market Rotation
All of these events control market narrative and essentially market sentiment, which cause investors to rotate capital throughout world markets.
After the pandemic crash, you could have rotated your capital into any equity. It was a buy everything rally. During the suppy crunch and the Russian war, investors moved their money into commodities and their related equity tickers.
Second Half Narrative
This year, since tech has been so beaten down over the past year, investors rotated into tech as many believe that the Fed will stop raising interest rates soon even though the economy is continuing to improve.
So, what will be the narrative for the second half of the year?
1. A continued tech/AI rally outperforms the rest of the market.
2. A more broadening rally into all sectors of the market due to improving economic conditions
3. The economy continues to improve, and inflation persists, so the Fed decides to increase rates much further, causing downside in the market.
4. Recession fears come back in a big way, causing selling throughout the market due to a slowing economy.
5. The Russian war escalates, causing negative sentiment in the markets.
6. Chinas economy improves, leading to improved sentiment worldwide, sending global markets up.
If you have a different idea of a possible narrative that could control the markets in the second half, then please explain in the comments below.
As always, this is not investment advice. Good luck trading. Be careful and be patient. Give your investments time. Don't be greedy. Don't invest in anything you don't understand. Don't put all of your eggs in one basket. Don't listen to the hype. Don't fomo or panic into or out of trades. And just follow the trends. A trend is your friend.
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iamiam : spoiler, it's 3
SpyderCall OP iamiam : Who knows. We have been following the Volker era almost to a T since the pandemic. We might as well just keep going.
iamiam SpyderCall OP : the key is housing. it's all about housing. to few houses too many people. rates can not come down. same as the 70s
SpyderCall OP iamiam : right. that is why home builders numbers are up. they are trying to catch up the the demand. this should effect housing prices. Actually this past economic data showed that housing prices fell more last month than they have fallen in over 30 years. Powell said there should be a housing correction but since the pandemic housing prices have only gone up. This is the first drop in a while and it is a big one. Maybe this is just the tip of the iceburg. I cant call this one but i will be ready for the ride which ever direction it goes.
iamiam SpyderCall OP : I think that's misleading because my area is building houses like crazy and my home value keeps going up. there is no drop on prices here only increases. what that number is reflecting is an exodus from large population centers like California, new York, illinois to lower one's. the problem we have is no one wants to sell here.
iamiam : here is a good article
https://www.bankrate.com/real-estate/is-the-housing-market-about-to-crash/
iamiam SpyderCall OP : I can give you a real example. my aunt walked away from her home in Illinois for pennies. she just didn't want to be there, and no one wanted to buy it. she sold it to a neighbor for literally pennies on the dollar. something is better than nothing. she now lives out west with her daughter because there are no houses to buy
MoneyComesMoneyStays : Whatever the "hype" is I do the opposite. Most people have been yelling "recession" for the last 3+ years so I've done nothing but buy more.
jimclay8 : Gamma Squeeze...lots of 280 calls for the 7th
Hathaway : End of contraction, heading into expansion soon.
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