This week: monthly charts, positive January implications, bitcoin rotation, growth/tech risks, value vs growth, drawdown stats, bullish rotations in global equities...
That #10 on Drawdown Probabilities is fascinating, thank you for sharing!
At least 15% on 40% of years calls for some clever use of put options when well-priced ... the 15% drawdown takes the intra-year max as reference point, correct? (not Jan 1st)
Thanks Alvaro, yes exactly, I believe this is top-to-bottom moves (some years this might have been 1 Jan, others later in the year).
Yes put options are one "option", but there are a range of other measures one can take e.g. raising cash, buying defensive assets, diversification etc. [hmm, maybe I should do an "Off-Topic ChartStorm" special on the various approaches...]
A fun special on Probabilities and options to play them would be great....one thing is the extreme "black swan" scenario, another is the "obvious swan" scenario where 40% of all years present a drawdown of at least 15%... how to harness that probability without becoming ultra-defensive and losing the statistically more probable upside?
Insightful as always Callum (I know I say this every week but I appreciate how consistently good your charts + commentary have been!) A couple of points
- Re: rotation into value: We certainly saw signs of this at play with US consumer staples stock prices moving off their lows.
- Re: tech topping: Yep, another guy I subscribed to, Data-Driven Investor, came to the same conclusion too.
- Re: speculative rotation: That's really interesting. I heard someone in one of the investor communities said recently that he saw a bunch of crypto bro tweets re: going into silver... that might explain the outsized drawdown in precious metals on Friday. Though, with any bull market, there will be a few decent corrections (as you wisely noted - have a plan for drawdowns!)
That #10 on Drawdown Probabilities is fascinating, thank you for sharing!
At least 15% on 40% of years calls for some clever use of put options when well-priced ... the 15% drawdown takes the intra-year max as reference point, correct? (not Jan 1st)
Thanks Alvaro, yes exactly, I believe this is top-to-bottom moves (some years this might have been 1 Jan, others later in the year).
Yes put options are one "option", but there are a range of other measures one can take e.g. raising cash, buying defensive assets, diversification etc. [hmm, maybe I should do an "Off-Topic ChartStorm" special on the various approaches...]
A fun special on Probabilities and options to play them would be great....one thing is the extreme "black swan" scenario, another is the "obvious swan" scenario where 40% of all years present a drawdown of at least 15%... how to harness that probability without becoming ultra-defensive and losing the statistically more probable upside?
Great question. Will start tinkering on this
Insightful as always Callum (I know I say this every week but I appreciate how consistently good your charts + commentary have been!) A couple of points
- Re: rotation into value: We certainly saw signs of this at play with US consumer staples stock prices moving off their lows.
- Re: tech topping: Yep, another guy I subscribed to, Data-Driven Investor, came to the same conclusion too.
- Re: speculative rotation: That's really interesting. I heard someone in one of the investor communities said recently that he saw a bunch of crypto bro tweets re: going into silver... that might explain the outsized drawdown in precious metals on Friday. Though, with any bull market, there will be a few decent corrections (as you wisely noted - have a plan for drawdowns!)
An additional point to note: margin debt expansion hit a new peak in Dec.
https://www.advisorperspectives.com/dshort/updates/2026/01/22/margin-debt-finra-new-record-high-december-2025
Thanks, yes I was going to include one of my charts on margin debt, the rate-of-change has put in a minor sell signal.