RE:RE:RE:Oil up, Oil stocks down: Consider a pairs trade Jay......Less risk than the suggestion by Migraine but shorting means you are taking unlimited risk if the market moves against your position. When I was in "the Business", very few of my clients needed to take that level of risk to meet their financial objectives. A much safer way was to simply find ways to reduce your expenditures and increase the amount available to invest or in the case of retired people, use up less of your savings.
In terms of the Fed, the best we have is to look at the recent dot diagram. This suggests that they expect one more rate hike before year. Next year they expect to reduce interest rates by 50 basis points. If this in fact happens then there is essentially little change from current rates over the next year.
In this scenario, there may be some movement to a normal/traditional yield curve but the prospect of it staying inverted is quite high.
All that said, the Fed track record over the decades has not been stellar to say the least in terms of things going the way they project. The elephant in the room (literally as well as figuratively) is that Biden's record budgetary deficit and fiscal stimulus is likely to continue and work against anything that the Fed is doing.
As I have mentioned before, the current situation reminds me more of the 1970s as opposed to say what happened in 2008. In that scenario we saw a wage-inflation spiral which took some time (years) to manifest itself in a recession. Recent wage settlements and the current UAW strike is a case in point.
Earlier, I was predicting a recession in 4Q of this year. There is still a strong possibility that this will happen. My current view has changed somewhat based on the fact that I anticipated that the Fed funds rate would have been at 5.75 a few months ago as opposed to in a month or two. As well the Biden stimulus has gotten off the ground quicker than Governments historically do which is delaying the slowdown. So we might not now see a recession until Q1 or Q2 of next year.
Either way, my current asset allocation is very conservative and heavily weighted towards cash and fixed income. Any new investments beyond my core long term equity positions are short term opportunistic trades - in and back to cash as quickly as possible.
So getting back to your post Jay, if the recession doesn't happen until sometime in the first half of next year and short term interest rates stay in and around where they are, then the cost of shorting the Indexes could be an expensive proposition requiring discipline, nerve and patience. Not everyone has those qualities.