What a difference a week makes…
As of the time of this publication, over the past day and half, the S&P 500 has fallen by -5.5% and the Nasdaq by -9%.
As we have long been warning, tops are processes, which can take months to play out. But corrections are events; they happen quickly — oftentimes leaving you no time to react.
Case in point: just look at Tesla (TSLA). On Tuesday, the stock hit an all-time-high of $500/share. Investor confidence was off the charts.
But now? It’s down to $380. That’s a 24% drop. In just two and a half days.
Given the (over)confidence the months-long rally had imbued them with, many recent investors in Tesla were buying call options vs the underlying stock. Given the current plunge, those call options are now totally worthless. A LOT of people, many of them neophytes who didn’t appreciate the risk involved and who can’t afford these losses, have just gotten badly burned.
Of course, TSLA is just one example. The current carnage in the markets is widespread, across all sectors — exactly as we’ve been warning for months was likely to happen.
And yet, there’s another factor that may add additional surprise for investors into the mix: the potential that the US dollar may strengthen substantially from here. That is a move that today’s markets are definitely NOT expecting, with shorting the USD currently being one of the most popular trades.
This week’s guest expert, Brent Johnson of Santiago Capital explains the Dollar Milkshake Theory and why he predicts the vast one-sided trade against the US dollar is dangerously wrong. In the short term, if surprised by a sharply-rising dollar, markets will likely sell-off further.
Those watching these weekly Market Update videos know well that we’ve been warning for months that this is one of the most treacherous times ever for investors. The “unstoppable” rally may very well have just ended and, given the massive over-valuations that still remain as well as the persisting damage to the real economy, the bottom may be far lower than current market participants can imagine.
And if you’re one of the many readers brand new to Peak Prosperity over the past few months, we strongly urge you get your financial situation in order in parallel with your ongoing physical coronavirus preparations.
We recommend you do so in partnership with a professional financial advisor who understands the macro risks to the market that we discuss on this website. If you’ve already got one, great.
But if not, consider talking to the team at New Harbor. We’ve set up this ‘free consultation’ relationship with them to help folks exactly like you.