Why I'm Bullish in the market on the midterm

3일 전

Introduction
I want to break down why I’m optimistic about the current market conditions and share my strategy as we approach the release of CPI data. I’ll walk you through the big picture—the macroeconomic landscape, the Fed’s approach, economic indicators, and the geopolitical situation
MACRO ANALYSIS

1. Fed’s Approach Dovish
Let’s start by looking at the macro environment. Right now, the Federal Reserve is signaling rate cuts. Market now is expecting a 0.50 cut at the end of the year. A good question is why the Fed is cutting rates. In my opinion, the most important reason is that inflation is almost at its target of 2% year over year. This is crucial because it tells us that the economy isn’t overheating anymore. The Fed no longer needs to keep rates high to control inflation.
So what happens when rates come down? Companies can borrow money at lower costs, consumers can spend more freely, and overall, this adds fuel to the economy. We’re also seeing quantitative easing, meaning more liquidity is being pumped into the market. This will likely lead to a weaker US dollar, which isn’t necessarily a bad thing. A weaker dollar can boost exports and benefit risk-on assets like cryptocurrencies and equities.
Adding to that, CHINA, Japan and potentially the EUR are taking dovish behavior in their monetary policy, CHINA stimulating the economy strongly. BOJ reducing the hawkish,Adding more fuel to the global markets.


2. Economic Strength
We’re seeing strong economic indicators.
JOLTS Job opening 8.14M vs 7.64M, ISM Services PMI were stronger than expected 54.9 VS 51.7 and continued above 50 indicating expansion. NFP data 254k vs 247 number better than expected, Unemployment rate 4.1% vs 4.2% better than expected.
These are signs that businesses are still hiring, consumers are still spending, and overall, the economy is not strugglin.
This is important because it means we’re not cutting rates due to a weak economy and helping it—. The FED is cutting rates because inflation is coming under control, not because businesses are struggling. This distinction is key for my optimism. Lower borrowing costs paired with a strong economy create a good environment for growth.
This means that a dovish monetary policy, strong economy potentiate the growth, expansion, investment on the economy and business that this is reflected in the equities prices.

3. Geopolitical Conflict
The third piece of the puzzle is the geopolitical conflict in the Middle East. Yes, this adds some uncertainty to the global outlook, but from a market perspective, geopolitical events tend to create short-term volatility. As long as the situation doesn’t escalate further, I don’t see it as a mid-term threat to the broader market. When the situation stabilizes, we could even see markets gain more confidence. For now, I’m not letting this weigh too heavily on my decision-making.
Elections USA, just adding on this part that both sides are going to continue expanding the debt and increasing the expenditures, Trump is proposing more stimulus to the economy with a more aggressive reduction of the rates. Generally both sides offers similar paths but Trump more aggressive

CONCLUSION
In the midterm the macro indicates a good environment for the equities to continue higher.
Some names I’m looking for are in the crypto space such as IBIT, ETF as TQQQ and stocks as NVDA, Meta. But I will cover in another letter