INVESTORS ARE EUPHORIC! Fund managers are now all-in! Is this it? Has the equity market peak arrived? Your sober reality check…awaits

Now, I want to share something here with you.

And rather than enquire about what you think, I’m going to ask something else instead.

My question to you is how do you “feel” about this?

The reason why I ask about your feelings about the above post is this. Emotion is going to play a much more prominent and important role during the final few years of the current 18.6-year Real Estate Cycle.

So, dear reader – do you feel such a statement is correct? Do you feel that we are now all-in? That this “era is now different”? Because if posts like this are correct, the next question must be posed.

Is this cycle about to peak earlier than forecast? And if so, what one earth do YOU need to know and do with such information?

So, let’s look now. Is PSE wrong? Did we get the timing here wrong?

Important questions that require a deep dive.

The first thing that may pop into your mind is “well, if our American cousins are all in, then should I go all-in as well?”

Fair question. Well, a single graph does not invalidate over 200 years of economic history; however can we find some other corroborating evidence that may in fact back up this viewpoint?

Well, I would ask you not to look for other graphs, tables, or research that can provide an alternate picture first. Before that, put your real estate cycle lens on. Years 12 and 13 of the cycle are regarded as the Mania phase (this is how Akhil Patel refers to this time in his “The Secret Wealth Advantage” or as the PSE property clock calls it – the Winner’s curse.

And this mania phase is kicked off by a widespread change in sentiment about the world, the economy and markets. In fact, statements like “this is a new era now” or “this time it’s different” start to enter the vernacular.

You can then start to see the hubris and over-the-top and ridiculous statements start to go mainstream. As an example, you’d start to read things like this.

See what I’m getting at now? These are designed to elicit an emotional response from the reader. It’s also a perfect size to be aggregated across all social media platforms and go viral.

I will say however, some of this is base in fact, it wasn’t completely made out of thin air. US equity markets have had a strong run higher out of the August 5^th lows.

But is that enough to say that all US households are completely in on the stock market? Is there any other sources of truth behind such a point of view?

What’s the latest data concerning inflation telling us?

One of the most persistent inhibitors to the US Fed’s planned interest rate cuts was the fact core inflation remained higher than the range-bound goal of 2%. As the chart shows, should the data prove resilient, we are already there, if not moved lower than 2%.

Such data of course shaped the recent speech by US Fed Chairman Jerome Powell in a speech on August 23^rd.

“The time has come for policy to adjust. The direction of travel is clear, and the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks…..

…..The current level of our policy rate gives us ample room to respond to any risks we may face, including the risk of unwelcome further weakening in labor market conditions. ”

I’ve written to you here before, and readers of both Phil’s and Akhil’s books would know, that one harbinger of the upcoming peak is when we are all-in, with no capacity left to borrow and no liquid assets remaining to place into the stock market.

Do we have here the set-up of which both authors speak? Are we about to hit the peak of the current real estate cycle?

Did PSE get its timing, whisper it now, wrong?

Do you still have those real estate cycle lenses on?

Something you are going to have learn to do, unless you’re a natural already at it, is to be skeptical about what you read and hear from now on.

Go back now and relook at that first X post. At face value, a single chart with no explanation of how the data was sourced with hyperbolic headlines is hardly prima facia evidence to me.

And yet, this represents how the most important financial and economic news is disseminated today. Via a single post, a single graph or table and a clickbait headline. The importance of this is paramount; this time last completed real estate cycle there was NO social media platforms.

There is no precedent for just how quickly news spreads today. And almost none of it is designed to educate. So when people online start throwing numbers around, even spending 10 minutes of research to find corroborating evidence can be fruitful. For instance, start by asking “but is that really the case?”

I quickly discovered that the claim “US allocation to stocks hit 57% of total, near the highest level ever recorded” is missing one crucial piece of context. JP Morgan, one of the biggest banks on earth when it comes to investment markets, happened to have released a note to their investors last week.

Here is how they reported the same ‘fact’. Bolded text is my own.

“The wealthiest 5% of US households poured even more cash into the stock market, allocating 57% of their investments to stocks, 8% to cash, and 23% to fixed income.”

So, that rules out the remaining 95% of US households then.

But Darren, as you’ve shown yourself, US stock markets are on an absolute tear lately? Yes; I agree. But if I may provide a small amount of context? If you study markets, you’ll have heard of the term ‘rotation’ when it comes to liquid assets such as stocks, bonds and the like.

At the start of August we witnessed the markets when they forgot their medication. The USD/Yen carry trade unwound at a violent rate, as the below table demonstrates.

Out of equities and into safe havens of bonds and cash. However, given the fact we have witnessed a “V’ shaped recover in US markets, is it not accurate to say that in large part this has been driven by the above trend reversing?

Sure is. Note the fact US equities have basically returned to where they were again pre-carry trade unwind.

Most importantly though (and you should know this by now), the history of the 18.6-year Real Estate Cycle tell us that it is too early for all of us to be irrevocably ‘all-in’ on speculative assets.

And that same history tells us a extremely important clue as to what “actually’ will happen next. So, what “is” this clue, how do you best look for it, and crucially, what do you do about such information? Knowledge of the land market is how, and how lucky are you that by becoming our newest Boom Bust Bulletin (BBB) member, you can learn it for yourself.

Overcome the echo chamber that is today’s media and place you and your family’s future on the best possible footing. Each month you will receive the latest news pertaining to the cycle, showing you why it turns on time, and how to uncover the hidden order of the economy.

Knowledge that 99% of market participants today do not posses! And believe me, you’ll need that knowledge very soon. Here’s an example of why.

The “clue” I alluded to before was this. At this late stage of each proceeding cycle, when central banks decide they need to intervene and push interest rates down, here is what history shows happens to equity markets.

A new macro-trend emerges. The concentration you see today in a handful of tech stocks in the US unwinds and then broadens into those sectors that are cheaper and more attractive for fund managers.

New market leaders will emerge. Stocks that are cyclical in nature now outperform as the world’s money markets begin to anticipate an upswing in the Western/global economy.

How would you like to be in on such a trend before the majority? More crucially, be out of it before they peak?

Such a strategy requires timing the economy, and the best ‘timer’ of the economy are the land markets. Not a click bait post on social media.

I trust I’ve demonstrated as much to you here.

Don’t waste valuable time.

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