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Good day to you both. Tom Lee, I'll start with you. What do you think about today's rebound and intraday buying after this morning's strong market shake-up? I guess whether we're talking about stocks or Bitcoin—it's your choice. Well, I think both markets have been watching the VIX index very closely because, you know, last week the VIX peaked at 30 or just below 30, and it was a minor fluctuation.
And today there was an attempt to increase volatility, but the VIX could only rise to 26, and then it seems to have ended the day at practically zero. So I think that the last couple of days have seen a market clearing, a significant reduction in leverage, which is a healthy phenomenon, and one of the indicators of this is the amount of institutional money in the market, which is now 3.065 trillion.
This is actually a step away from the peak values of May 2020 . So, hedge funds and institutional investors have accumulated so much cash in the past few months that the amount of “ dry powder” on the bench is almost the same as last year. So what? Do you think this will trigger a new round of growth?
Do you think the market has bottomed out, even tech stocks? Is that what you mean? Sara, that's a great question, because the situation will be resolved in one of two ways. Or the market will suddenly lose all buying potential because all the money will be sitting idle, and we will see a serious drop.
But I think the chances of rapid growth are higher. So as long as the economic momentum continues, partly thanks to vaccination and consumer confidence, I think we'll see growth. I believe there has been significant consolidation in recent days, but this is just a prelude to a big move up in the stock market.
Shi, what are your thoughts on this? Well, we are certainly still very positive about the stock market. At this point, we see concerns about inflation. But, you know, this is not news anymore, and we think that inflation will certainly cause a lot of volatility in the markets, as we see today, but in the end it will not be so bad, and it will not lead to a prolonged sell-off .
So, regardless of where you invest in the market , I think it's important to stay invested right now, especially with inflation, because holding a lot of cash doesn't make much sense. Mike, if you look at the US dollar, for example, there was a move after the Fed minutes were released, where the Fed mentioned that it was discussing discussing considering tapering stimulus only if economic conditions continued to improve, without signaling a significant change in the schedule, but that seemed to trigger a move in the dollar and Treasury yields .
Is there any reason to believe that the fundamental concern about higher rates and higher inflation has changed enough to send the market into a sharp rally, as Tom Lee says? In fact, there is no reason to believe that much has changed. You have to look very closely to see changes in the margins. Even for the dollar, it was so stretched to the downside, almost near the lows.
So I think maybe the fact that the Fed has hinted a little bit more that there are a few voices in the committee talking about the need to start discussing talks about tapering stimulus. I mean, this is ridiculous. But yeah, I really think that was enough of a signal that we're on a path where we're going to have to watch for this, and it's a question of when, not if, it's going to happen.
So maybe that was a little bit of the point, but the rest of the market wasn't, and yields remain in range. Credit markets, as I always emphasize, remain absolutely stable. They don't have anywhere much to grow, but they're certainly holding up well. So, this suggests that this wasn't really a broad uprising of asset classes against the outlook.
It wasn't really related to macroeconomics, this small pullback in stocks. Tom, I just wanted to go back to what you were saying just now, because it seems like last time you said the Nasdaq 100 still has the potential to fall 5-7% before it goes up, but now you're saying you're leaning toward the likelihood of a sharp rise.
What would that growth be, and how do you balance these two opportunities? We still believe investors need to reduce their positions in the technology sector. You know, it's a consensual and overloaded deal. So we think the Nasdaq 100 or QQQ should go down to around 300. I would even say that Bitcoin's dynamics could be a kind of harbinger of what the Nasdaq is going to do.
But the rest of the market could grow. And you know, if the S&P goes up 10%, I don't think the tech sector is going to fall. I just think it won't grow by nearly 10%. But, you know, the reason why this sector is crowded is because consumer money and interest will be focused on where there is pent-up demand.
And that, you know, we'll see. If the CDC relaxes its recommendations for other activities, particularly cruises, I think investors who have been avoiding many of these stocks will start to refocus. So I think there are mechanical reasons why investors should reduce their exposure to technology companies. .
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