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TPW Advisory Friday Musings: Hall of Mirrors
A Bruce Lee fan, I have used his work before (Be Like Water). In thinking about today’s Musings, the term “hall of mirrors” came to mind. It refers to an epic fight scene in Bruce’s breakout movie, Enter The Dragon, shot in 1973, where Bruce & his enemy fight in a hall of mirrors, in what Vanity Fair has called: “a fight scene still revered today as one of the best in film history”.
Investing in today’s markets seems a lot like fighting in a hall of mirrors to me – maybe it’s the down 6 days of the last 7 or down 10 of the last 11 weeks. Maybe its the S&P experiencing 90% down days in 5 of the last 7 trading days – the most aggressive selling seen in the past 100 years. Throw in the Fed raising rates in a bear market for the 1st time ever & one sees lots of enemies, coming at one from all angles.
Perhaps this helps explain all the examples of tremendous gaps between sentiment and reality, gaps that exist across the spectrum. A few examples might suffice: the gap between record low consumer confidence (think what that means – worse than GFC, Covid, 9/11, 1987, 2000) & robust consumer spending (Pantheon sees 2.8% consumption in Q2). Or the huge gap between how individuals see their situation – 40 year high vs how they see the country – 40 yr. lows. MS notes that consumer sentiment bottoms usually precede strong stock market performance.
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