As I have said (as per my posts for a few days)I have no positions in this, not long or short but for the bulls to suggest infaltion is under control is ludicrous. As I said in a prior post getting to 2 percent core infaltion is light years away. The first one percent not so hard, all the other percent going to be very hard and we will see interest rates going higher and for longer than first thought.
Fed made it very clear they not taking their foot off because it allows infaltion to rise again then the problem is x 2 worse. So they will keep them higher beyond what is needed to make sure as they have said. However, once infaltion does finally start to see some real improvement (I would guess infaltion stays high through 2023) what does that mean?
It means the Fed finally broke the consumer and jobs market (as they said they will) and we have a recession. Bulls are ignoring the fact we are heading into a recession. The only way you see inflation come down meaningfully and we not talking 1 percent, is if consumers stop spending simple as that. Which means earnings will continue to fall, which then means we going to continue to see more lay offs on mass.
So markets are climbing with blinkered retail? How does this leave valuations and P/E's? Market was overvalued before IMO and getting worse. But bulls will continue to drink the Kool-Aid and tell us all to ignore all the basic economics 101 stuff cause greed wins. I am sorry to say this but I was always in the deep correction camp to put the bottom in (yes bulls crazy if they think we have a bottom).
But, as I said yesterday when indices trade like penny stocks and you see this volatility, you are also seeing huge red flags. Put simply something has broken. Nothing changed fundamentally yet we racing along as though everything is fine, very overvalued but on nothing but greed. Because of this I am now sifting my view from deep correction to potentially a crash if this continues.
It does not remind me of 2008 it reminds me of 1987 (yes I traded both I am not a "covid trader" as the vast majority are) and saw the same run on nothing but greed when basic fundamentals get thrown out. This new generation thinks they are the first to trade stocks hehehe. But one huge difference cause this time is different is the markets were artificial to begin with pumped by Govts.
As a result we now have debt that has risen at a speed never seen before. We kicked the can down the road in 2008 but we can't kick the can anymore simply put. So IMO if we continue to see already artificially inflated markets played with as though they some tiny market cap stock then we facing the real possibility of another crash as things start breaking. Crypto already gone IMO.
P.S. Don't mean to be Doom and Gloom but really we haven't even seen the worst part of the recessionary cycle yet that being when infaltion starts to fall when we have near full employment and high interest rates. Good luck to all but make sure you are out when the music stops because its a long way down when reality sets in. Hence I still sitting it out seen it end before.
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