Market Thesis: We're in September/October 1973. What's next?
I've spent the last two nights playing with charts putting the Dow + Unemployment Rate + CPI + 10Y on a single chart so I could see relevant periods in the past vs today.
Here's the two charts I've come up with (1970-1980's):
We haven’t even seen an uptick in unemployment (today)
CPI has cooled a little, but if you look back, it’s not uncommon for that to happen and then resume - especially if you’re not doing aggressive rate hikes (75bps is not aggressive)
The cheap money is switched off. That’s not coming back for a long, long time - so that’s not what the market is after
What the market fears most: rising CPI + rising unemployment triggered by rate hikes.
When both of those are coming down, you’re getting a bull run you can tell your kids about
With them going up, you’re looking at 23-50% drop to the bottom. We've seen that once already with the Dow - recent low: 28,600 (-22%); Currently: 32681 (-11%)
We’re in September/October 1973.
If we get the drop in November (more likely December) drop, then we know for sure
So what's the move? A few more weeks up before a big drop (15-20%), bounce half way back up the drop, volatile as hell for another 6 months before another big drop of (25%+), then if we see CPI coming back down AND unemployment going way up, we'll know it's the bottom.
I lost my mind a bit on this chart, so take it with a grain of salt.....but I'm playing it.