Pal: These Kinds of Markets Kill You

Your Real Vision Daily Briefing for September 18, 2020

Raoul Pal is joined by Ash Bennington to look forward to the future of markets as well as Real Vision.

  • The collapse in volatility across markets has created a difficult investing environment, but the bond market is still a reliable barometer of what’s really going on.
  • We’re seeing indicators of a deceleration in the recovery and a potential trend change in equities.
  • Amid so much uncertainty around whether everything has changed, it is more important than ever for investors to develop a framework, to listen to diverse viewpoints, and to keep learning.

GET REAL VISION'S FREE DAILY BRIEFING DELIVERED DIRECTLY TO YOUR INBOX EVERY DAY AFTER MARKETS CLOSE

Get the latest information as we analyze the next phase of our new global economy and discuss what we think is to come.

There’s literally nothing going on, Real Vision CEO Raoul Pal said during today’s Daily Briefing, while discussing the collapse of volatility in the bond market, oil, precious metals, and even Bitcoin.

Pal said these kinds of sideways markets kill you because either you’re trying to time your entries and you get stopped out or you’re just sitting on options and you bleed to death because nothing is going anywhere. Whatever you think about volatility, it’s overpriced, he said, because literally all prices—even the Fed’s balance sheet—are nailed flat.

Except of course the equity market. Pal said there are indicators that the market may stop and pause here and also some signals of impending price action. The market has formed a megaphone top, and that expanding range of volatility often means there’s a trend change, he said, but he believes we’re unlikely to see any real action yet.

He said investors can always look to the bond market for the truth about what is going on. Right now, it is going sideways, which tells us that equities are unlikely to break because there’s nothing underlying that’s potentially changed. If the bond market starts breaking lower in yield, Pal said, it will tell us that the forward expected growth forecasts are changing. And when the bond market tells you that, you listen. Pal also said investors should watch the banking stocks, which look like they’re ready to break lower at some point.

Pal continued the interview with a conversation about the importance of establishing a framework for your investing strategy and how connecting with other investors can provide incredible value. He provided an overview of the cross-section of investors on Real Vision’s new platform, The Exchange, and argued that the open sharing of ideas, analysis, innovations, and learnings is a powerful tool for investors to leverage during such unprecedented times.

To wrap up, Pal addressed a question he said he gets all the time: has everything changed? He said that everything is so accelerated since COVID and now more than ever investors need to know what is false and what is a real trend change, because it can be highly profitable or highly risky depending on how you’re positioned. Pal will lead a two-week forum called “Has Everything Changed?” with experts from various industry sectors and markets to help give investors insight into how to think about things and what all of this could mean for them.

Pal’s final bit of advice  for the week ahead was to look at the bond yields and the banks for a signal. He sees the price in the S&P and the NASDAQ and what it’s doing, but is not convinced yet that this is the time to pile in.

“Don’t over trade. Wait for the ranges to break,” he said. “It’s ok when there’s nothing going on; quiet time is time to do your homework.” For Pal, that means figure out where you are, what you’re looking for, and how to move forward.

RELATED CATEGORIES: Daily Briefing, Market Analysis