For the Shape of Our Recovery, CHECK History

Many have suggested that our economic recovery will resemble the letter U or V. However, Gross Domestic Product (GDP) and Employment will likely require at least several years to recover. A rapid recovery is:

Instead envision the recovery resembling a check mark (think Nike swoosh):

This is consistent with the historical analogues we discussed last month the Great Depression and Japan’s Lost Decade(s), although in both of these cases the ‘tail’ (recovery) extended beyond a decade.

The Congressional Budget Office recently revised their estimate for Real Output (GDP) and employment, and they expect both to recover within the next several years:

Source: Congressional Budget Office

Both society and the markets are ripe for turmoil over the next several years. The Cold War with China and civil unrest will flare on and off possibly even conflagrating into a civil or world war. This instability will manifest itself in market turbulence.

Currently massive stimulus is blunting the painful reality that the economy (and some institutions) are broken. For these reasons I am very bullish in the near-term. Like a trauma patient given large doses of potent painkillers, we enjoy a respite from pain; but expect an arduous recovery.

This report reflects the current opinion of the author. The report is based upon sources believed to be accurate and reliable. Opinions and statements about the future expressed in the report are subject to change without notice. The report is not a solicitation or an offer to buy or sell any security. .

Market Valuations in Danger Zone as Federal Reserve Pledges Afterburner

Updated 9/1/2020 Gabriel Private Alpha Fund (after fees) SP-500 (SP-500 ETF SPY) Eurekahedge 50 (50 largest hedge funds) Index AI (Artificial Intelligence) Hedge Fund Index Barclay Hedge Fund Index Hedge Fund Index Return since January 2020 (the inception of GPA Fund) 33.0% 9.5% -5.2% 2.7% 2.3% -0.6% The United States stock market valuations are in a Danger Zone. A formula of stock market valuations around the world indicates that United States markets are the second most overvalued in the world (after India). Frankly our model forecasts negative one and two year S&P 500 returns if considering only market valuations. However the Federal Reserve’s actions in March 2020 temper this bearish outlook. In March the Federal Reserve (Fed) lowered the Federal Funds rate - the rate at which money is loaned to banks - to its present rate near 0% in order to fuel a stalling economy. Lowering the Federal Fund rate fuels the economy because it lowers borrowing costs. For examp

March 10th 2020 (mid-month Special) Report

You’re the defensive coordinator for an NFL team playing defense. It’s 3rd down with 3 yards to go. Will you defend against a run play, or a pass play? In the long run you would be wise to defend against a pass play; since 2008, NFL teams have passed 55.27% of the time when faced with 3rd down and three yards or less to go. Researchers developed a model that is able to further predict whether a team will run or pass under similar circumstances with 76% accuracy when taking into consideration factors like the number of seconds left in the half, the score differential, the yard-line the ball is placed, and whether a team is in shotgun or not. This model does not always predict the correct play, but it would be foolish to ignore this (or similar models) when calling NFL plays. I developed a model for investing that takes into consideration factors like market valuations, credit conditions, and investor sentiment to anticipate Bearish or Bullish marke

S&P 500 Overvalued but Likely to Move Higher

Market headwinds persist while tailwinds subside slightly. The S&P 500 remains historically overvalued , while the bullish effects of massive fiscal stimulus persist but are subsiding. The S&P 500 has traded within a range around 3250 (red line) to near 3600 (green line) for the past couple of months: The S&P 500 will likely continue to trade within a range until earnings catch up with stock prices and/or additional fiscal stimulus arrives. When the S&P 500 breaks out we believe it’s more likely above the green line than below the red line. We believe the S&P 500 is in a bull market and are bullish for the upcoming month. This report reflects the current opinion of the author. The report is based upon sources believed to be accurate and reliable. Opinions and statements about the future expressed in the report are subject to change without notice. The report is not a solicitation or an offer to buy or sell any security.

Gabriel Report