As we all know, the market bottoms far before the actual economic bottom. The fed injects money into the market which usually pulls us out of slow downs.
The only way the fed injects money into the market is if inflation is under control. Inflation only gets under control if we cool off demand. (and increase supply)
If earnings start dropping, doesn't that signify the beginning of the end of inflation? And if that is the case, doesn't that then signify the beginning of fed injections?
And if so, market multiples would begin to rise to match a cemented interest rate, say 3%? Thats still historically low and would bring asset multiples close to 25, no? (4% earnings yield) If that happens, that situation would offset a 20%ish drop in earnings.
Am I crazy or could this be a real possibility, and if so, would it be wise to begin buying?
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