Good Morning: Tomorrow, I’ll have a quick report for you on how to trade the Piotroski-Graham strategy in the second half of the year. However, before we delve into those names, I would like to outline the significant macroeconomic risk that has emerged on the horizon. When discussing liquidity (i.e., capital injected into the system), it is essential to have a deep understanding of how policymakers influence the stock market. Specifically, loose monetary policy creates wide distortions in markets. And when the policy must be met with an abrupt decision to reverse course, it leads to brutal consequences. Right now, we are at all-time highs. It’s hard for a lot of people to assess this because it’s a totally different world than most of us operated in before the Great Financial Crisis, and… COVID completely altered the global financial system, exposing the complete disconnect between the economy and the equity market. Today, policy is very supportive. The Fed continues to provide supportive policies. Central banks around the globe are injecting capital. The U.S. Treasury is keeping front-end yields lower, but globally, yields are ticking higher. All the while… we have clear signs of a mature cycle. We have stagflation signals, yield-curve steepening, narrowing market breadth, and parallels to the late‑’80s… This means that the current may be reaching its endpoint. Why does this matter? Because we could be facing something comparable to the years preceding the 1987 crash or the GFC in 2008. There could be some additional mania at play, but stretched valuations, combined with concerns about liquidity access, may lead to an inflection point. We have already seen four four-sigma events in the last four years, which have been met with more liquidity injections and additional support. That’s not sustainable… I know that you likely read a lot of newsletters and hear crash projections… You hear the ultra-bearish voices saying that you have to pull your money from the market before a certain date. And how often are those people right? This is the letter that has a track record of avoiding these events, and there isn’t a specific date in mind. There isn’t an event. It’s simply about understanding the market's flows and using the signals to move to safety. Again, here is a recap of what happened on February 21 of this year… The next step is to go on offense - when we get this next big downmove… Helping you understand the tools you can use to make significant gains in crisis… And that’s a WHEN… not an if. Something significant is coming… and we’ll be out in front of it. If you’re not a member of the Capital Wave Report, this is the ideal time to start learning how the market works… Then… stick with us to prepare each morning with an in-depth report on broad market (or ocean) conditions. It’s your money… let’s protect it. Continue reading this post for free in the Substack app
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