• Bull.




Below is a chart and brief excerpt from today’s Market Situation Report written by Tier 1 Alpha. If you’re interested in learning more about the Hedgeye-Tier 1 Alpha partnership, there’s more information here.

Major Index Drawdowns Given Current Backdrop - 19

Today's bonus chart showcases the drawdowns of major indexes from their 2021 cycle highs. While the SP500 has dipped just -10.6%, the Nasdaq and Russell have seen steeper declines at -18% and -27%, respectively. An investor would need a rally of about 22% for the NDX and 37% for the R2000 to reclaim break even from these lows.

Given the backdrop of an unprecedentedly rapid tightening cycle, years of demand pulled forward from COVID, record bankruptcy levels mirroring 2008, peak housing unaffordability, plummeting savings rates, the beginning collapse of auto subprime credit, and the strain of rising oil prices, especially on energy-importing nations like the UK, it's remarkable the SP500 is down just 10%.

A quick historical note for this Monday: In October 2007, the FOMC projected a growth rate of over 2% for 2008, echoing the familiar sentiment, "This time is different." The lag between yield curve inversions and their tangible effects on the economy and risk assets can be perplexing. We'll share the table from those October 2007 FOMC minutes for context. The SP500 dropped 57% following that meeting, and 6 million Americans faced home foreclosures. Patience is key, friends.

Major Index Drawdowns Given Current Backdrop - 20

Learn more about the Market Situation Report written by Tier 1 Alpha.


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