So as I posted yesterday, I felt oil prices would recover as despite the market panic, the extent of oversupply was still physically the same as the week before and other than tight liquidity and some panic selling, there was no reason why they should have fallen in excess of 13% over the week. Thankfully they did and we find ourselves not out of trouble but in a much better position. I expect US equities to perform well, oil to hold steady and US inflation to show improvement this afternoon. This should further support out positions.
With regards to the FOMC decision tomorrow, I have spent some more time researching it extensively. In particular looking at the curves for expected fed future hikes and expected market future hikes. While I expect the fed to be a bit more cautious, I still believe their curve will remain steeper than the markets tomorrow. I also believe from the failure of the USD to rally in the build up of an expected rate increase indicates that its current bid has taken into account market dovishness. I think while the Fed will be conservative, they will not be as conservative as the market expects. Could I be wrong? Absolutely! But what is the point in speculation if we do not follow our expectations?
Finally after an abysmal start to the week, things are looking a little better and I am actually more hopefully that we can reduce this months damage. As long as Inflation data does not disappoint severely this afternoon, I think we can shortly get out of the market with a smaller loss than our current unrealised losses.
As for the people who jumped ship, their loss (although I do not blame them). High risk trading is not for everyone and indeed anyone who expects to make more than 10X their money each year without significant losses or setbacks clearly does not understand that the capital markets reward risky investors. We have some great months, good months, bad months and terrible months, but what matters at the end of the day is where you are after a year or two years. Not after 2 weeks.
Thanks for being patient and good luck to all of us,