No More Stimulus At All
We’ve entered the stage of the economic cycle, where the FED is panicking.
When the FED panics, the market does as well.
After the market panics, the FED usually appeases it, by moderating its rhetoric and policies.
For now, though, even with yesterday’s kneejerk reaction to the December Minutes, which clearly left no room for error on the FED’s agenda to taper, tighten and raise interest rates sooner, faster and stronger than in the past, it doesn’t look like Powell is apologetic or having second thoughts.
We are guaranteed to see rate hikes:
Between now and March, the markets will have to determine how much stocks are worth, as bond yields will keep on rising and, in addition to that, the market will have to adjust to the FED’s exit from the bond market, as a buyer.
In other words, 2022 will serve as a stress test and a shakeout.
We’ll know, by the midterm elections, whether or not Millennials continue buying new homes at record prices with higher borrowing costs.
We’ll know if lingering inflationary pressures will stay elevated and whether or not people go back to work, as the winter ends and the disease-scare evaporates.
We’ll know what will happen with higher taxes on the rich and how the administration plans to narrow the wealth gap, if at all:
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These are major issues and big questions and one thing to keep in mind is that the wealthy realize they’ve just enjoyed tremendous success in both the markets and housing, so the risk-off mentality is certainly setting in.
Why take massive risk on the most expensive index valuation since the Dot.com, when I don’t have to, is the question millionaires are asking themselves.
Keep this in mind: the S&P 500 hasn’t made a correction (10%, top to bottom) since March 2020, so it is certainly due for one, even in this quarter.
Courtesy: Zerohedge.com, Bloomberg
If you’ve got cash on the sidelines right now, you are golden.
Let opportunities come to you, because the world’s most important central banker is telling you that he is making harder to make money in stocks and real estate.
Don’t fight the FED.
The key is to see where the 10-year bond yield reaches; if we are headed to 2%, it’s going to be brutal in Q1.
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