Date: November 20, 2023

The Three Musketeers Have Fallen – What Will The Bears Say Now?

This is going to be a quick update as I am catching a flight home. Throughout the Q3 pullback I often discussed the three keys for a durable bottom. They were crude oil, rates and the dollar. I continually received push back that there was no way rates and crude could go lower although people always seem to hate the dollar.

Well my friends, price never lies. Let’s start with crude oil. I would say $96 t0 $72 is a pretty strong collapse. We can debate the why another time.

But crude alone did not stop stocks from declining. They needed more help.

The yield on the 10-Year Note is below. From just ticking 5%, the yield has fallen 10% to below 4.5%. That certainly helped stem the tide.

And finally, let’s look at the dollar which everyone seems to always hate. All I ever hear is the dollar’s demise. And it’s going to zero. Heck, newsletter writers have been calling for its end for decades in this financial Armageddon nonsense and crap about the end of the western world. I always ask those doomsdayers which currency they would rather own than the buck. I usually hear “gold”. OK. Good luck with that long-term.

So look what happened once the three musketeers rolled over. “Risk on” assets like equities bottomed, turned tail and rallied strongly. I will leave you with what has become a very familiar chart of the S&P 500 where a pause to digest was due. Stocks could pull back 1-2% but that should be just another buying opportunity for the trillions of money sitting on the sidelines waiting and hoping.

The rally since the October bottom caught the masses totally off guard. Heck, I was keenly watching for the bottom and it had me questioning. The masses are in trouble unless stocks fall 10%. It is the final 6 weeks of the year and the bears were caught sleeping. Recall that they came into 2023 all beared up and negative for recession, inflation and war. They got a respite in March and in Q3 but most just doubled and tripled down. Bad move. The year-end performance chase is on and an awful lot of professionals won’t be getting big bonuses for crummy returns.


Paul Schatz, President, Heritage Capital