Key insights
- The author discusses the current overwhelmingly bearish sentiment and its potential impact on market crashes. The argument is that widespread hedging might prevent a crash, as investors are already positioned defensively. However, the author suggests that major crashes typically occur when least expected, contrasting this with the inherent upward bias in stocks due to passive investments and buybacks. This implies a slightly bearish outlook, suggesting limited downside but questioning the likelihood of a significant rally.
The sentiment in this sub and other investing subs like r/stocks are overwhelmingly bearish. For Institutional investors, they will buy puts to hedge their portfolio.
If people are hedged, they wont need to sell and therefore market won't crash...
Feels like all the big crashes happen when people least expect it. That is why there is the saying be fearful when others are greedy. There is not a saying for be fearful when everyone is fearful.
There is a reason why people are so bad at predicting crashes as oppose to buying and holding. The base case of nothing ever happens is stocks go up as passive 401k flows and buybacks kick in.