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« The Fed as a Fig Leaf | Main | Weighing the Week Ahead: Will the Interest Rate Surge Continue? »

May 27, 2013



Andrew -- We all wish we could out-guess market psychology. Most of those who tried that have missed the entire rally this year.

At some point, fear will take charge for a bit, but I don't know when. That is why I try to focus on the fundamentals each week.

You are asking the right question, but I don't have a better answer. (Nor do those who pretend otherwise).



You say, "I warn clients to expect a 15% market decline at some point, even in good years and even when not justified by economic fundamentals."

Do you think we get that prior to the Fed's eventual announcement of a qe change, at the time of an announcement, or some future point?

Personally, I think when the Fed exits it will be a positive for the economy as we'll be at escape velocity. Also, any pullback should be bought. I think it'll be tough to get a 15% pullback because there are lots of investors - individuals and institutional - that are underinvested waiting for a chance to get in. Thus, it'll be tough to get much beyond 7% as buyers step in.


You and many other pundits have been warning the collapse of high yield bond since the beginning of 2013. But the market has been doing the opposite what you predicted so far. Just take a look at the chart of HYG or JNK, high yield bond ETFs have had very respectable gain so far. With anticipating more volatility in the summer as you said, also with investors are still hungry for yield, will you think the high yield bond differently?

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