The Top.

Dear co-investors, family members and stakeholders,

Market topping is a process not a single moment in time. Markets all top at different moments. And yet commentators often talk about ‘the top’. The irony is that unlike the mountaintop (above) market commentators only recognize a top well after it has actually happened.

But since humans need to simplify the S&P500 top is a good proxy for the moment the ‘market’ peaks. We have been predicting an S&P top in Q4 of this year for two years now. And today we think it has arrived due to a conjunction of timing and fundamental factors. The Fed rate raise coincides with a mid-December turning point from the day counts.

The topping process involves a move from more risk to less risk. So the riskiest markets will (or have already) top first. Lets look at what has topped already:


Semiconductors are a lightning rod for the whole market. They always top before a major peak and their current fall has already reached up to 10%

Emerging Markets

While they haven’t confirmed yet, emerging markets have potentially topped back in October.

High Yield Bonds

This is one of the clearest forms of risk, and one of the clearest charts showing a slow rollover. The peak was back in July already.

Short-term Dax

Even the Dax has made a classic spiked top a few weeks ago.

We could continue. On the fundamental side we note that discussions about tapering are important to both actual liquidity entering the market and sentiment. We continue to see increasing risk in geopolitics from Asia, to Europe and above all in the US. And In the stock market we have got to valuations that no longer imply positive returns going forward. For a more detailed discussion of the arguments we refer to the 2018 outlook on the website. Better be flat from here on in.

Happy holidays