Thursday, August 18, 2016

Stock Market Risk Catalysts

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*With yen passing the 100 threshold for risk we wanted to review other catalysts that need watching.
*Oil, inflation, fiscal policy, rate hikes all hold within them market risk. We'll explain why.
*This is not a call on timing. This is a call on what to watch.

Everybody can say the market (NYSEARCA:SPY) is too expensive and therefore it can go down. Valuation alone is typically not the catalyst to cut expensive stocks or markets. Usually the valuation needs to be popped by something. We wanted to review key catalysts that we are focused on that can be a risk to markets. This report is not necessarily saying they are happening now, but rather a review of what needs a constant watch.
The market can continue up despite high PEs unless a catalyst hits. These are a few key catalysts that can bother markets.
*Fiscal Policy Initiation
*100 Yen
*Oil at $30 or $60
*Inflation / Rate Hikes
Let's go one by one.
Fiscal Policy Initiation
The world is awash in central bank monetary stimulus. For the last eight years initially the US followed by the EU and BOJ have pumped tons of money into the system through asset purchases.
Here's the chart to show how much money was pumped into the system.
The above chart shows how the US Fed (dark blue) started a run of liquefying the universe with money by buying financial assets. Buying issues money to the system to banks to lend and gives confidence to the economy that it should begin to march on its own.

Chaim Siegel has been working with hedge funds and mutual funds as an analyst and PM his entire career. Chaim specializes in earnings and predicts, analyzes and reacts to earnings and earnings events as well as developing current company stories with a hedge fund perspective. If you want his analysis real time sign up to the right for real time email alerts. #in, $spy, $qqq, $iwm, $vxx, $ycs, $fxe, $EUO, $YCS, ^GSPC, INDEXSP:.INX, #elazaradvisorsllc, CME Globex: ES Disclosure: These trades can lose you money and principal especially when using leverage BY USING THIS SITE YOU AGREE TO TAKE ALL RESPONSIBILITY FOR YOUR OUTCOMES AND LOSSES AND HOLD BESTIDEAS, ITS CONTRIBUTORS AND ELAZAR ADVISORS, LLC HARMLESS