Market Outlook for April 9, 2023 - Title Pending

0:00 - 33:20 Yields, OAS
33:20 - 47:33 Housing and REITs
47:34 - 57:04 Labour
57:05 - 1:00:07 PMIs
1:00:07 - 1:19:23 SPY

CFA/Applied series subscriptions:

LINK TO S&P SPREADSHEET:

[sadecki]

Hey Mark, just wanted to say thanks for all the market outlook updates, CFA related videos, and especially the applied options series. I’ve learned a lot from all your content and have been following your channel/website for a few years now. I’ve been interested in the markets since high school and in the last 10 years your channel and website has been the best educational resource that I’ve come across when it comes to applying knowledge and theories to the financial markets. I really appreciate seeing your thought process when approaching the markets with various ideas/strategies and it has helped shape how I approach financial markets. Happy Easter!

[Shivastorm]

Hi Mark, re-posting a question from the previous outlook that I think was missed (I listened to last week's Q&A in full and didn't see my question pop-up). It was a three-part question, but one of them in particular I was curious to hear your thoughts on.

1) Something that you mentioned got me thinking. You mentioned that 30% or so of S&P's weighting is tech companies. I took a look at SPY. Of the top 10 holdings, 8 of those are tech companies, which represents 27.19% of the weight of SPY. I then took a look at their P/E (data pulled from Google Finance): 28 for AAPL, 32 for MSFT, 143 for AMZN, 159 for NVDA, 23 for Alphabet Class A and C, 57 for TSLA and 26 for META. Versus 8 for both XOM and BRB. Where I'm getting with this is, is it possible that the elevated P/E that we've had of late in SPY, including the persistent elevated P/E that we have right now despite the recessionary backdrop in which we find ourselves, in part caused by the significant upward skew of these tech giants? I haven't gone through the exercise of looking at what the P/E would be if we stripped out only the top 5 tech holdings of SPY (AAPL, MSFT, AMZN, NVDA and Alphabet), but I imagine that we would have a much more respectable P/E ratio this way. Does it make sense to look at it this way, or would that be the sort of confirmation bias that a perma-bull would do?

[conan.who.am.i]

Hi Dr. M

Thank you as always for your insights.

Just now, Wells Fargo as per Bloomberg wrote that they are waiting a 10% correction on S&P at around 3700.

Just wow.

Question; I am one more person that you have convinced to get the CFA designation. Besides that and money that may come from this path, what was the constant motivation to have a continuous effort to learn more?

You are indeed that “history teacher” to me.

[yannickstaenz]

Great content as usual, thanks! What is your opinion on the introduction of 40-year mortgages?

[Peter_]

Hi Mark, many thanks again for the video! Priceless! About commercial real estate, is multifamily housing part of it? Can ABR be affected by a possible credit "crisis" in CRE? Happy Easter!

[nabeeletx]

Hi Mark, I’m interested in your Applied Series Bundle. Do you cover how to add a position in a portfolio and calculate portfolio volatility, portfolio beta etc?

[MrMrMrMrT]

From day trading snake oil, to this. Mark, you're a wizard we don't deserve. thanks for the knowledge!

[PlungerBull]

Hey Mark you should make a quick video showing how to buy 1-3 months t-bills on IBKR!

I keep getting an error which doesn’t allow me, so I’m definitely doing something wrong

[lucasszymkowiak]

Thank you Dr. Mark! Here are a few questions from L2 candidate:

1) Could you please explain how it is possible that your SPY position breakeven is c.3300, but SPY index was nowhere near that level recently? Is it because of the carry you earn from selling puts?
2) Are you decreasing your short positions gradually whilst the index falls or do you wait before taking 'full profit' i.e. SPY reaching ~3600 level?
3) I've seen you focus on your portfolio theta exposure very often. Could you please explain why it is important to have theta ~1% of your portfolio MV? I've heard about theta decay, but can't connect it with portfolio MV and risk.
4) Would younger Mark Meldrum consider moving abroad for better job/earnings prospects if he was living in a post-soviet country?

Thank you,
Lukasz

[iluvbaseball]

Hey Dr. Meldrum,
Thanks as always for the information! What are some indicators to look for to know when the next business cycle expansion is happening?
Thanks!

[Sawubona]

G'day Mark, could you please explain how you're calculating min and max gain in your TLT position. I understand what play you're making with TLT just not the dollars and sense. Does this mean you can't loose at all on your TLT trade? What if TLT goes to $80-$90 and stays there from Dec 2023 onwards for e.g.?

Cheers

[liquidus]

Thank you very much for the update. What are your thoughts on LEAPS and in what instance would you consider them superior to selling deep-in-the-money puts. I am not talking in general but in a particular instance when one expects a stock or an ETF to trend over a 1 to 4-year period. Would buying a deep-in-the-money call 1.5 years out to get hold of 100 shares, and then tactically selling covered calls and puts on those positions make sense? Or maybe selling a stip of puts would make more sense? Thank you

[arishah]

Hi Dr. Mark:

If the Forward curve 18 mos from now is indicating int rate cuts, do you think that is ironic keeping in mind that inflation is still pretty high and the fed should keep rates where they are atleast for a good 1 year to get inflation down meaningfully. Also, since markets look ahead, Do you think Info Tech outperformed Q1 in Canada and the US due to the expectations of lower cuts? No real catalyst factor except for cutting jobs which would lead to higher Net Profits and henceforth a positive signal for the share price. Thank you!

[aikteenheng-vuto]

Thanks for the great outlook as always. Qns: you mentioned that some equities are actually sensitive to interest movements and therefore has duration. How do we compute a common stock duration? Or do we use proxies?

[mcli]

Thank you Dr for the sharing again. Few question and comments hope you could share your thoughts.
1. Would you be able to give us a history listen that you know about PE multiple evolving from low signal number to long term average of 16.6 times? I think this is directly due to interest rate, but like to hear your thoughts.
2. What is your thoughts on M2 and momentum on equity market for 2023. When I place M2 chart from FRED and S&P momentum index side by side for past 10 years, there is a high correlation between them. If that's the case, given fed expended their balance sheet in 2020, are we in a new regime for PE multiples?
Thanks

[lemming]

Hi Mark, for the live next sunday, can you move it 3 hours before? I'm in Europe, 12am is way too late unfortunately. Unless 5% of your audience is Europe based and it makes sense to do what is beneficial for the overall community.

[mfc_in]

Considering strategies like bear call spreads or covered calls, can you touch on how you determine attractive prices for shorting options? How do you balance waiting for volatility to maximize price with capturing time decay?

[tjloehnert]

Hey Mark, can you recommend any academic papers that attempt to explain why recessions have always followed a 3-mon/10yr inversion?

Love the content

[zaydomar]

Prof Meldrum thanks again for an illuminating video. I had a question about risk management with respect to your "SPY factory" from the applied series course. How do you do risk management when the market falls 5-6% 3 or 4 times each day in a week as they did during the COVID crash. It sounds like when there is such a big drop during such a black swan event you have a huge delta risk and a massive gamma risk as well. To me it seems like the only way to prevent your account from blowing up you would need to make sure that the SPY factory is only a small part of your account. Am I missing something? Would love to hear your opinion. Thanks.

[oliverbird]

Thanks for the great updates as well. 1. how do we come up with the capital market rates? is it thorught the supply and demand of something from the market? 2: are the fed officials restricted in investing the market since they know much more information ahead of the public? Thanks!