End of the Year: Surge or Plunge? Insights from HSBC's Max Kettner
🤡 This article may lead some friends to think I'm blindly bullish. Let me clarify that this is an article I came across, and I will explain it; it does not represent my personal views, although I think he makes some valid points, and his thinking is quite similar to mine. (A bit shameless, I know)
First, let me introduce the author of this article, Max Kettner, the Chief Multi-Asset Strategist at HSBC. He has accurately predicted most market movements over the past few years. (Not 100% accurate, though)
🤡🤡 His conclusion is that Max believes the biggest risk facing the market by the end of this year is not a meltdown but a "melt-up."
Everyone knows what a meltdown means. Let me briefly explain what a melt-up is: it refers to asset prices rising sharply and rapidly in a short period. However, this is usually not driven by improvements in economic fundamentals but rather by investors' "fear of missing out" (FOMO), short squeezes, and a sudden influx of off-market funds.
🤡🤡🤡 Next, I will provide my interpretation of his article, and the main text begins.
The main narrative of this article revolves around the idea that "due to excessive cash and caution among investors, the market may surge because there is nothing left to fall."
This viewpoint is based on the fact that there are many bearish voices in the current market, but these bearish sentiments do not stem from actual negative information. Moreover, Max does not believe that the fundamentals are terrible, nor does he think that AI will lead to mass unemployment, and he observes that corporate capital expenditure intentions appear low.
His understanding of funds is that investors are scared, so they are pulling money out of the stock market and holding it in US dollar cash (the reason for the rise in DXY) or money market funds (the reason for the decline in US Treasury yields). This, in fact, serves as a "contrarian buy signal." Because once the stock market rebounds, this massive amount of off-market cash will be forced to chase higher prices out of fear of missing out (FOMO), thus driving the stock market to surge.
He also believes that the market is not in a "retail trading frenzy" phase, and positions are not overly full. This indicates that many people (or institutions) have not bought enough and still have room to increase their positions. (This explains why institutions are building positions)
Key points include:
Corporate investment intentions are not high, indicating no excessive investment bubble.
Discussions about layoffs in earnings calls have decreased.
There is currently no strong evidence that AI is causing mass unemployment.
These three points suggest that the US economy is still in a safe zone. Since there are no mass layoffs, there is no recession, and the sell-off is merely driven by panic rather than any real negative news, such as a recession.
Currently, the cash scale in US money market funds is at a historical high (around $6-7 trillion). This indicates that people are very scared and are pulling money out of the stock market (and cryptocurrency market) to earn interest. However, Max believes that since everyone is holding cash, the potential buying power is enormous. Once the stock market rebounds slightly, this cash, which was moved for safety, will flow back into the stock market out of fear of missing out, pushing stock prices sky-high.
My thought is that if the Federal Reserve chooses to cut interest rates in December, this cash may enter the market. Of course, aside from a potential rate cut in December, some actions by Trump could also influence market sentiment, and even a court ruling against Trump's tariff violations and their cancellation could be a positive for the risk market.
🤡🤡🤡🤡 Overall, Max believes that the recent sharp decline is a washout. Due to investor panic (VIX soaring, buying money market funds), the market has been cleaned up, making room for a melt-up by the end of the year. Max does not focus on macro data; he emphasizes the flow of funds. He believes that the $7 trillion in money market funds is not just looking to earn interest.
My view aligns with his in that the market is not without opportunities for reversal. One reason is that the liquidity loss caused by the shutdown has not yet recovered; once it does, it will inject vitality into the market. Secondly, the Federal Reserve's meeting in half a month may still have a possibility of rate cuts. Lastly, Trump's tariffs are likely to be canceled, and these three points could all serve as catalysts for a market rebound.
Combining this with Max's article, he believes that once a rebound occurs, it will trigger FOMO in the market, significantly raising prices. Of course, he is referring to the stock market, while I have always believed that $BTC and tech stocks are highly correlated. Currently, tech stocks dominate the stock market, so if tech stocks rise, Bitcoin should not perform poorly.
🤡🤡🤡🤡🤡 In conclusion, Max may not be right, and I may not be right either. For those with differing opinions, consider it just some useless knowledge.
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