We have the perfect storm for the destruction of value of HFEA.
* The Fed's forward guidance is arguably the most hawkish in multiple decades, with extreme inflationary pressures that make you think about the Volcker eras. Everyone in this thread who said 'inflation is over' and 'high interest rates are over' have gone quiet.
* Stock markets are still trading at
~95th-percentile valuations when looking at CAPE, even with the current dips. The reality is stocks are as richly valued as Dotcom bubble era, and while bulls have pointed to low interest rates as justification, the era of low interest ends is coming to a swift end.
* The combination of these two things (stock market in bubble valuations + sharp rises in interest rates) mean
cash becomes valuable. Unfortunately for a strategy like HFEA, it is -200% short cash; which does not bode well if cash becomes the best performing asset class (by the virtue of maintaining its nominal value; while stocks reset their multiples to historical averages and so do bond yields; which reduce bond prices).
The last time this happened HFEA lost ~90-95% of its balance, and like they say, there's no free lunch. The price of 30-40% CAGR during the good years is paid by a 90-95% destruction of wealth during storms. I hope everyone has followed the advice that HFEA should only be a very small proportion of the portfolio, added and rebalanced separately.
If so, (as it is for me with HFEA being a small portion of my fun money), continue to follow your IPS. But if you are one of the folks whose portfolios are substantially or entirely HFEA, I would exercise significant caution and recommend posting in the personal investments section.
While stocks go up in the long run; there's no assurance that you'll see 3x leveraged daily-resetting swaps of 37x CAPE stocks and 2.17% yield LTTs ever make a new high in your lifetime.