#1027 Darius Dale On How To Navigate These Difficult Moments In The Market
7/1/2022 · 35 min · transcript via mlx
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Key topics
— Darius Dale presents a four-cycle framework (liquidity, growth, inflation, profits) showing all are simultaneously in downturns, creating unfavorable conditions for risk assets.
— Consumer sentiment has collapsed to first-percentile levels; the gap between present situation and future expectations signals recession is approaching or underway.
— The Fed is fighting two wars: inflation and credibility; Powell signaled the central bank will endure near-term economic pain to restore price stability.
— Bitcoin has descended to $19,000 support faster than expected; if that level breaks, there is no meaningful technical support until potentially $15,000 or $10,000.
— The Fed will drain approximately $915 billion in liquidity from markets through year-end via quantitative tightening acceleration, potentially pushing S&P 500 fair value to 2,900.
Market & price signals
— Bitcoin is trading just under $19,000 (18,930 as of the discussion), representing the worst month in a long time and worst quarter since 2011. Darius Dale flagged $19,000 as critical support; a break below signals potential further decline to $15,000 or $10,000 with no interim support. S&P 500 fair value under heavy liquidity drain could fall to 2,900. Core PCE re-accelerated to 4.1% (double the Fed's 2% target); median CPI hit new all-time highs at 5.5% year-over-year and 6.4% on a three-month annualized basis. Consumer spending slowed to 0.2% annualized in May; goods consumption fell 1.4% on three-month annualized basis while services consumption grew only 1%—below trend. Real incomes declining approximately 4% year-over-year.
Actionable insights
— Reduce risk exposure immediately. Dale recommends "less risk on" as the primary portfolio adjustment in a simultaneous liquidity, growth, and profit downturn; avoid high-beta assets that will decline fastest when markets sell off.
— Monitor the $19,000 Bitcoin support level closely. A breakdown signals no meaningful support until $15,000 or lower; position sizing and stop-loss placement should reflect this technical risk.
— Watch June CPI (due July 13) and the July 27 FOMC meeting as near-term catalysts; the Fed may step down from 75 bps hikes to 50 bps if inflation prints decline, but quantitative tightening will accelerate regardless, creating a net liquidity drag.
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