The stock market is wrong: the economy isn’t going to ‘blow a gasket’ just yet, warns economist
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2022 Oct 5, 4:48pm 690 views 4 comments
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2
Shaman
2022 Oct 25, 7:12pm
Shaman
2022 Oct 25, 7:12pm
Market is rising because it looks like the election is going hard for Republicans. Market will get one more bump post election when results are in and better than expected FOR CONSERVATIVES.
Then will come the bad news about the economy, persistent inflation, and traders will reconsider as we probably get a actual recession call.
After that it will be pure tax loss realization as the year winds down and people want the write off. Normally they’d buy back in but the situation will seem spooky, so they hold off and the market heads lower, maybe MUCH lower.
I’m putting my investments in bonds right after the election!
Then will come the bad news about the economy, persistent inflation, and traders will reconsider as we probably get a actual recession call.
After that it will be pure tax loss realization as the year winds down and people want the write off. Normally they’d buy back in but the situation will seem spooky, so they hold off and the market heads lower, maybe MUCH lower.
I’m putting my investments in bonds right after the election!
3
clambo
2022 Oct 25, 7:26pm
The stock market is like a pendulum and swings a bit over each way; however, I am guessing or predicting a nice bump after the socialist Democrats get their asses kicked in November.
I have no new money coming in; if I did, I would be buying all I could.
My perspective may be different because of 1. travel 2. my age
I have seen fantastic economic growth since I was observant in the 1970s. Many of the products and services we use today didn't even exist then; who knows which new products or services there will be in the future?
I have also noticed that people spend their money happily these days; it wasn't such years ago.
Stocks for the long haul; my problem is I haven't many decades left on earth to appreciate capital.
I have no new money coming in; if I did, I would be buying all I could.
My perspective may be different because of 1. travel 2. my age
I have seen fantastic economic growth since I was observant in the 1970s. Many of the products and services we use today didn't even exist then; who knows which new products or services there will be in the future?
I have also noticed that people spend their money happily these days; it wasn't such years ago.
Stocks for the long haul; my problem is I haven't many decades left on earth to appreciate capital.
4
AD
2022 Oct 25, 9:56pm
AD
2022 Oct 25, 9:56pm
Shaman says
There would need to be two consecutive quarters of negative GDP growth AND unemployment that is at least 5%. I believe that economists won't say we are in a recession because unemployment has been very low.
Once the labor market tightens that should help with reducing inflation.
Corporations will make the working class more hungry and motivated to increase productivity.
.
Then will come the bad news about the economy, persistent inflation, and traders will reconsider as we probably get a actual recession call.
There would need to be two consecutive quarters of negative GDP growth AND unemployment that is at least 5%. I believe that economists won't say we are in a recession because unemployment has been very low.
Once the labor market tightens that should help with reducing inflation.
Corporations will make the working class more hungry and motivated to increase productivity.
.
While this year’s sharp selloff in stocks might feel brutal, particularly after the carnage of September, the S&P 500 remains about 17.1% above year-end 2019 levels, according to Dow Jones Market Data.
That isn’t low enough, given the likely scope of Federal Reserve actions needed to bring surging inflation back to the central bank’s 2% annual target, according to Steven Blitz, chief U.S. economist at TS Lombard.
“Yes, markets are being routed, but, to date, they are resetting from too rich price levels created by Fed policies that went on way too long,” Blitz said in recent client note.
“Financial conditions are consequently tightening but are not yet enough to
justify concerns the economy is about to blow a gasket.”
Blitz pointed to how little financial conditions have tightened (see chart) relative to past recessions, to bolster his case for why the Fed still needs to raise its policy rate by more than anticipated.
U.S. stocks ended lower Wednesday in choppy trade, after rallying sharply to kick off October and following their worst September since 2002. William Watts wrote how after a harsh September, the S&P 500’s typically sees modest gains a month later, but not the Dow Jones Industrial Average, when looking at historical data.
The main problem, for Blitz, is that this year’s stock-market decline has been “hardly a shakeout” when looking at the roughly 50% drop in equities in the 1974-75 recession and the one in 2008-09.
“More to the point, the market has gotten here by pricing in the Fed’s 4.5% solution (4.5% inflation, 4.5% unemployment, 4.5% funds rate) with all believing this
will be enough to put maximum downward pressure on inflation,” Blitz said. “It won’t.”
Investors have been focusing on Friday’s jobs report for September for clues as to whether the Fed might keep up its pace of outsize rate hikes in the face of robust wage gains that have been fueling inflation.
Instead, Blitz estimates the Fed “solution” might need to hit 5.5%, particularly with household balance sheets remaining resilient so far, even as interest rates have dramatically climbed, which has cooled the housing market as the 30-year fixed mortgage rate nears 7%.
Energy costs as a component of inflation came back into focus Wednesday as crude prices rose after major oil producers agreed to reduce their collective crude production levels by 2 million barrels a day, starting next month.
The decision was followed by the U.S. benchmark West Texas Intermediate crude for November delivery gaining 1.4% at $87.76 a barrel.
U.S. crude prices have tumbled from an peak intraday high in March of almost $130 a barrel, according to FactSet data, after they surged as global economies first emerged from pandemic lockdowns, but also as the move to greener power sources gathered steam and from Russia’s war in Ukraine.