Understanding the difference between the time to market & the time to invest is a key investment lesson; one I thankfully learned early in my career.
The empty IPO calendar, a closed HY issuance market, the SPAC implosion & demise of the YOLO and diamond hands mentality suggests its clearly not time to market. Could it be the time to invest?
Sentiment, positioning, valuation deratings, non US equity outperformance, the huge valuation gap between public and private innovation/thematics all suggest its time to consider the question. Private markets lag well behind public market valuation reset > supports public market thematics.
Inflation is priced in, recession is today’s fear. Equity bear markets w/o recession are akin to what has already occurred. Bond market leads inflation repricing, equities follow as excessive Fed tightening is the recession catalyst.
Amidst the carnage the market is telling us what is working; If one wants to sell, what’s working should be kept. If one wants to buy, what’s working = buy list. Non US equity is OPing; innovation/thematics trying to bottom.
Taking out Fed risk presents both tactical & strategic opportunity: tactical as Fed risk is repriced (May’s 10 yr. breakevens decline is largest since March 2020); strategic as it opens the path to the new, new world of high nominal growth we expect in 2023-2025. Don’t despair, pay attention.