Definitely looking better today and end of yesterday, but I have my positions sized such that I can sleep at night and not feel too stressed out about the market on a day-to-day basis. If the market rockets higher, I have more dry powder to deploy on the short-side. The point of this post is to say that you can be right about your position but still wrong in the market if you use too much leverage and get stopped out before you can see your worldview validated.

Nah, if the fed keeps raising rates and keeps them higher-for-longer there will be pain in interest-rate sensitive sectors and valuations for all US stocks. The immediate risk for the rally is that the ten year rallies above 4% again and tech stocks/long duration gets whacked again.

My overall thesis is that inflation will stay elevated for longer than people think because there is a lot of money from fiscal stimulus that hasn't been deployed yet (greater demand than before) and even with China reopening, supply won't ramp fast enough in the next year to mute the heightened demand. In this scenario, the Fed keeps raising rates because inflation gets another peak and they are hesitant to rapidly lower rates until the job market breaks. When the job market breaks, people pull money out of their 401ks (especially if laid off), stop DCAing (or net sell), and slow down their consumption. All of these things will slow down the economy, lowering companies revenue and profit margins (aka earnings). This situation will eventually allow for lower rates, but not before there is a lot of pain. The current pricing for equities implies that the fed will start lowering rates within the next year AND there is no recession. The only way the Fed lowers rates from here (and even higher) is if we have a recession that shows up in the jobs numbers.

I currently think we get out without a recession for 2023, but persistant inflation forces the fed to keep rates above 5% and then we see some level of recession in 2024. I don't think SPY, QQQ, etc. are priced for this scenario, so it's a good risk-reward to be short US equities broadly through OTM options as a hedge against a standard long-only portfolio. If the market continues to rally, I'll be flat to slightly up. If the market takes a huge shit and goes to 3600 again in the next month or so, I'll be up big. Worst case scenario is we grind between 4000-4200 for the next month, but again, I'll lose less than 2% of my portfolio in this case. You've got to love the convex payout of options :)

Yeah, bro. I'm pretty damn liberal, but I'll still call myself a gay bear and call this questioner a regard. That's just what makes WSB great.

first time on WSB, regard?

Good mod

No, it’s “buy high, sell higher.”