The bounce back to 4,000 for the S&P 500 (SPY) made some sense. It was time for bulls to take the wheel after three weeks of a mauling bear market. However, the move above 4,100 was…
Even more insane was traders eagerly buying stocks pre-market on Tuesday expecting inflation to ONLY come in at 8%. Thus, when the reading was 8.3% they soiled their beds and stocks tanked in a hurry to provide the biggest one day drop on the year.
What on earth would make these people think that 8% inflation is OK? Heck, even if it came in at 7.8% that is still about 4 times above the Fed’s target with many more hikes and much more economic pain to come.
Let’s get back on board the sanity train with this week’s review of bear market conditions. This comes hand in hand with an updated trading plan of how we not just survive, but actually thrive during the 2022 bear market.
Tuesday’s -4.32% shellacking of the stock market was not a surprise to anyone watching my updated marketing outlook shared Monday in the POWR Platinum monthly webinar. We discussed why its still very much a bear market. And how similar the action is to 2000-2003 with many “suckers rallies” sprinkled in to trick investors before the true and lasting bottom was found.
Perhaps the most important part was reviewing the new “Fed Commandments” etched in stone by Chairman Powell and handed down to investors from the mountain tops in Jackson Hole. It basically proclaimed to anyone who will listen…
Thou Shalt Expect:
- Long term battle with inflation
- Higher rates through at least 2023…if not longer
- Economic PAIN!
That presentation is a good place to get started today to cover why we should take the Fed at their word and prepare for more economic pain and market downside to come. And yes, Tuesday’s horror show was but a small taste of what is to come.
Now back to today’s action.
Inflation is still here.
This is ONLY a surprise to those who were solely basing their view of inflation on the price at the gas pump. And yes, gladly that is down greatly across the country.
Unfortunately, there is much more to the inflation equation which was on full display in today’s far too hot +8.3% reading. This headline from CNBC tells the rest of the story:
Inflation isn’t just about fuel costs anymore, as price increases broaden across the economy
As we dig into the details, we find that the food at home index is up a whopping 13.5% year over year. Not far behind is increases in medical services.
Then we find that “sticky inflation” for wages and rents are not…
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