A brutal week for the stock market ended with quite a few big techs losing more than 20% from their all-time-high. The indices fair better because of the weighting factor – as these big techs drop, their weighting in the indices also drop so we do not see the full impact at all if you do not pay attention to the individual stocks.
So what’s next? I already explained in the past that US election year has a very strong bias to go lower from July onward until the election is over. That’s 3 more months to go. Maybe we get an early bottom if the indices have dropped significantly lower such that fundamental players step in. We will see soon enough.
Here is a video of Gundlach’s reactions to FOMC announcement on Wednesday. He believes that the Fed will cut rate and that for sure in a year, Fed will cut 150 bps based on his models.
My take, exactly as I predicted there is no rate cut for this year, at least in the first half of 2024, while all these experts calling for 5 to 6 rate cuts. Why do I know? Because inflation at more than 3% is not a linear figure – it compounded over a 4 year period already so in order to bring inflation back to norm it has to be a negative figure for a prolong period of time before the world returns to a level that is reasonable relative to people’s income level.
BTW, every single time the Fed started to cut rate, a crash landing in economy happened that took down the stock markets by a minimum of 20% from the date that started the rate cut cycle. So do you really want to see a rate cut now?
My position stays the same – it is more likely the Fed will keep the rate at the current level and no rate cut, forever, or, until after a major crisis hits. And I have a good explanation on why the Fed is trapped. Check out this video on the extreme QE done by the US government itself that render interest rate policy useless.
You really think Powell does not know that? If he cuts rate due to political pressure, inflation will jump to unimaginable level crushing everything …
So what to do in a world like this … I guess a dose of astrology outlook is in order.
For me, back to work as usual.
Have a great weekend all!
