Known Versus Unknown & Brandon in the Bunker

All the way down in the first half, at least until April or so, bullish investors were saying "everything is priced in." Day after day I would see sentiment indicators showing extreme bearishness. I ignored these because the market was not bearish, precisely because these bottom callers were constantly coming out of the woodwork. Additionally because they were almost always using data sets that only covered the previous bull market. 

"Everything is priced in" also doesn't work when mood changes because nothing is priced in. At the peak of the Nasdaq in November 2021 and S&P 500 Index in early January, nothing was priced in. When mood changes, the news flow turns negative. Not only is bad news not priced in, but more bad news is coming, day after day, week after week.

If a larger rally unfolds this summer, it will happen because two conditions will be satisfied. First, investors are sufficiently pessimistic such that they've priced in much worse news than is coming. This upcoming earnings season could be that. I wouldn't bet on it, but it is possible. Evidence would be provided by a bad earnings report by a major such as Apple resulting in a gain in the stock price. The other catalyst will be actual positive news, be it a Fed pivot (likely positive in the short-term only) or legitimately good news such as peaceful developments in Ukraine.

The downside scenario is that the market simply doesn't understand how bad the situation is here and ever more negative news continues rolling out. There's some risk there with Western governments behaving like Hitler in the bunker. The Biden admin has modeled for $200 oil and $10 gasoline, which would unleash a depression the likes of which hasn't been seen since the 1930s. I think that outcome is unlikely, but I also see no sign that the government cares in the slightest. These are the same people who did the lockdowns after all. Assuming they're sadistic people trying to maim and kill their own citizens has been a fairly good predictor of their policy choices. Becoming too political with economic and market forecasts is always a losing move, but then I've never in my life or U.S. history seen a government this destructive. I assume at some point they'll cry uncle on some issue, but they haven't yet. Here's the latest headline: Biden proposes limited drilling leases off Gulf of Mexico and Alaska

Administration officials said fewer lease sales — or even no lease sales at all — could occur, with a final decision not due for months.

The most bearish thing about the markets and economy right now is the Biden administration. They are making everything far worse than it needs to be. I honestly thought they would have done something positive by now, thus I've been moving "USG doing something good" from the unknown column to the known column, but in the negative.