Short-Term View: A Possible Relief Rebound

The sharp sell-off in November, followed by the Fed’s emergency action, suggests that markets were oversold in the near term. Positioning had shifted towards fear, so a short burst of buying is possible. If liquidity expectations improve and investors believe the Fed will end QT smoothly in December, a short-lived “mindless” rally can occur, driven by mechanical flows rather than conviction.

Medium-Term View: Decline Likely Not Fully Over

Despite the rebound potential, several indicators show the broader correction may not have run its full course.

• Valuations remain elevated, especially across megacap tech.

• Earnings downgrades are creeping in, yet prices have not adjusted proportionately.

• Volatility is rising, a sign that markets are struggling to find equilibrium.

• Liquidity remains fragile, even if QT ends next month.

These factors usually point to a market that still needs to cool before a sustained uptrend resumes.

Key Risk Drivers This Week

• Rate expectations remain unstable. Any shift in inflation data can trigger sharp swings.

• Bond market stress remains the biggest systemic risk.

• Institutional flows have been cautious despite pockets of dip buying.

My Stance

Short-term: Mildly bullish due to positioning, liquidity hopes, and technical oversold conditions.

Medium-term: Cautious to mildly bearish because valuations, earnings risks, and tightening financial conditions remain unresolved.

A sustainable bull leg likely requires a clearer disinflation trend, stabilised yields, and stronger earnings momentum. Until then, the market is prone to choppy rallies rather than a clean trend reversal.