What big money is doing?

This is what Lance Roberts said: "Over the last quarter, the "Death of Fundamentals" has become apparent as investors ignore earnings to chase market momentum. However, throughout history, such large divergences between fundamentals and price have resulted in low future returns."

I totally agree and I also think this time is unlikely to be different.

Here is just one fundamental piece about the current situation how the economy has been hit... and hard! As we know, travelling is a big part of our daily life that impacts a lot of economic activities supporting the GDP. In the past 3 months or so,  the US travels have been cut monumentally, from nearly a total halt to still 80% down by now. Extrapolation from this, I guess we can guess what the earnings will be looking like in the coming season coming soon. 

 The S&P is trading at a PE of 23, probably the most expensive level at least as far as I know.  No wonder we are entering the era of "Death of Fundamentals"! No question, the pushup of the stock market must be driven by the big money if it wants to sustain and continues. No surprise that we do see the influx of Big Money into stocks in the past 4 months, which has led to the subsequent historical rally. 

However, we start to see a slow down of the big money influx to the market (see below the yellow line). Similar early this year when BM was pushing up the market relentlessly, it started to slow down quietly starting in Feb while the market continued to be hot and euphoric. And we know what happened soon after that. Now we start to see the same setup that the Big Money is quietly retreating from the market but the market cannot care less and continue to pump up. Will the Mar plunge repeat this time? No one can tell as of now but at least be careful if you have the habit of chasing!  FYI three sectors show a slowdown in big buying: discretionary, financials, and technology.   

Not sure if it is just a coincidence that the Fed liquidity is also shrinking right now in the past two weeks. As we all know, this historical rally could not have occurred if there were no unprecedented Fed unlimited QE instituted following the COVID 19 pandemic. If the Fed money flooding slows down, logically it will impact on the liquidity for the market. We will see if the two will continue to march together in the weeks ahead.