I’m an investor in an early stage global macro fund. Each month, we publish a newsletter with our thoughts on the market and our fund’s performance. I’m now publishing an edited version of that newsletter here, so a broader audience can participate in the conversation.

In February’s letter, we stated our expectation that there would be a corrective near-term bounce in March.  We also mentioned that it would likely be timed around the FOMC meeting.  This turned out to be exactly what we got:

We are reiterating our view that this short-term bounce doesn’t necessarily mean the beginning of a sustainable recovery.  We believe that the downside catalysts remain unchanged, and in some cases are getting worse: (1) slowing corporate earnings, (2) oil and other commodities continuing to trend up, (3) the Fed tapering, (4) an unclear resolution to geopolitical tensions.  

We continue to urge caution over the next 3-6 months, and view this recent bounce as a great opportunity to raise cash.  We’re not totally convinced that the Fed will stick to the plan of raising rates through the rest of 2022 as there will likely be deflationary catalysts that give them the aircover they need to change direction.  The rebuttal to our argument is that the Fed will get (3-6 months) delayed feedback on if their rate increases are working, and as such, could possibly go much further than they should before changing course.  In either case, the market seems more appealing after the Fed changes directions and starts easing again.

We think another leg down in the market is somewhat likely, and think it could come in the summertime (most likely June or July.)  A summary of how we feel over the next month, two quarters, and year as follows:

• • 30 days: Neutral
  • 180 days: Bearish
  • 365 days: Slightly Bullish

We reiterate our EOY price target on the S&P 500 of 4850.

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