I love negative feedback loops. They are self fulfilling prophecies and there is nothing you can do to stop them.
JP Morgan cut its price target for the S&P by 9%, on earnings of $120, to 2,000–which is actually a 6.5% gain from current levels.
However, the tone of the note led me to believe they’re really piling onto the “fuck the Fed’ bandwagon that Wall Street is promoting now, attempting to shape policy to be more conciliatory towards a very easy monetary policy.
“There is increasing risk that elevated volatility starts incurring enough technical damage to market psychology,” a team led by Lakos-Bujas wrote in a note to clients on Tuesday. That could spill over and negatively affect business and consumer sentiment, “resulting in a lack of risk taking, and eventually creating a negative feedback loop into the real economy.”
“While in the short term an expected pickup in buyback activity and positive fourth-quarter earnings surprises may provide some support to equities,” the team wrote, “absent a positive central bank catalyst, we see equity risks skewed to the downside over the medium term.”
The JPMorgan team also said the S&P 500 is likely to post two straight years of flat to negative earnings growth, as the “risk of earnings recession is rising.
There is nothing to do or say. The negative feedback loop is like a black hole of doom barreling towards your farmhouse. Next thing you know, you’re consumed by it and life as you know it sucks.
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That actually sounds like a positive feedback loop to me. Risk taking decreases market decreases and so on and so forth…
The fuck you meab
Positive feedback loops amplify change whereas negative feedback loops tend to maintain an equilibrium.
He’s on drugs
If everyone is expecting and prepared for a crash then will that crash happen?
I’ve been asking myself that since everyone was predicting a crash this year. So far though, they’ve been right.
Sentiment is considered a contrarian indicator. That is, if everyone is predicting a crash, this sentiment predicts a rally instead. Like all indicators though, it sometimes predicts correctly, and sometimes predicts incorrectly.
Attempts have been made to further refine it though. E.g. it is said that sentiment is correct during the middle of a move, but incorrect at the extremes, or at the end of a move. This may be 20/20 hindsight though. Because the main way you know something is extreme is if it gets no worse and begins to turn around and go in the other direction. And you only see that in hindsight. Same with “the end of a move.” You don’t know when the end of a downturn– or a rally– happens, until after it is over and you are looking back.
So like all indicators, sentiment as a contrarian indicator works when it works, and does not work when it does not work.
Like an Oozlum bird.
+1
I am but a poor man thirsting for rich ideas.
John Paulson is a rich man thirsting for poor ideas.
So short something, already.
+1
I’m heavily long Gain. Picking up tranche sales.