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Bearishness In Social Media Amid Rallying Stocks

The S&P 500 is up more than 20% on a total return basis year-to-date amid record bearishness in social media.

There has been an incredible number of bearish posts in social media this year but the S&P 500 is up 20.5% on a total return basis.

SPY has gained nearly 51 points year-to-date after the 2018 correction and the V-bottom recovery that followed due to dovish Fed.

The 60/40 passive allocation in SPY/TLT is gaining 16.4% year-to-date.

Both stocks and bonds have rallied this year for the same reason: expectations of lower rates. This is an anomaly that should not last too long.

Note that since 1960, the S&P 500 has been up more than 15% in 21 out of the 43 up years, including  this year, as shown in the first pane of the chart below. But in most of the years when the market was down, specifically in 10 of them out of 16, it lost more than 10%, as shown in the second pane.

A 20.5% gain so far in a year with record social media postings with bearish arguments of all sorts is another proof that the market does not care about what those permabears think. The market is only listening to Fed officials and is convinced they are in control of the path of prices. This is what most in social media do not get: the market does not try to rationalize macro or micro, it only cares about the economic policy.

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