Another down week and this week looks no better.
Last week’s inflation report sent the various averages and indexes south on expectations that the Federal Reserve will continue to raise rates at 75 basis points for the next several meetings.
The thought that the Fed would be satisfied with where we are was completely unfounded.
I understand the concern that the market will tend to deteriorate but that is just the price we pay when we let demand outstrip supply.
I still have not seen shoppers pulling in their purchases.
What we are seeing is debt levels rising as a means of compensation.
Of note last week was the Standard & Poor’s 500-stock index closed the week below 3900.
That is not so remarkable since we have been here three or four times this year alone, only to reverse course.
The problem to me is that we seem to be making these visits after shorter durations.
With the markets on the negative side to start this week and the Fed announcing the next rate increase, we may have finally pierced the 3900 level.
The real question is what will be the bottom.
There are arguments for 3600, 3400 and 3200.
There is always the thought that people sell on the rumor and buy on the news or vice a versa.
What we have in my opinion is a market that has much to evaluate.
We still have a war in Ukraine and the threat of Chinese invasion of Taiwan.
The coming winter for Europe will be difficult with the cost of natural gas for heating.
The dollar is stronger against all other currencies.
Unemployment remains relatively low but hiring is slowing and we are now seeing calls for job layoffs.
The core of inflation does not seem to come down as quickly as hoped which will keep the Fed raising rates into next year.
It almost seems laughable for analysts to forecast what the next rate rise will be when they can’t even forecast the next Consumer Price Index level.
With the core above 6%, we have a long way to go to get down to the 2% target that the Fed set years ago.
It doesn’t help that we got a rather poor earnings expectation from Federal Express last week.
It is these reports that cut the legs out from under the index.
I had a friend call me last week in complete distress about the value of his portfolio.
He was wondering if he should just be in fixed income as the gyrations of the market were too much for him.
The problem is that there is nowhere to hide.
For me, it is just waiting to shove the chips onto the table.
I really believe you will have the same chance you had two years ago at the beginning of the pandemic.
The problem is that it will not be an easy call.
