Meta Strategy Derivatives Portfolio – Probability Map Update.

All eyes are on inflation, and the path of a strengthening FED taper narrative will likely be the main influence for stock prices over the next months. As long as liquidity flows unimpeded, the buy-the-dip mentality will probably prevail. But, conversely, the slightest sign of tightening conditions should see strongly negative reactions in equity markets.

Rising inflation now leads to negative real earnings yields for the S&P 500, which makes stocks an inherently unattractive investment for the long term.

As usual, I map my current data-driven estimates of the probabilities for future returns of the S&P 500 over the short, medium, and long term.