So first of all I know that time in the market beats timing the market and dollar cost averaging is the way to go when it comes to long term investing ( that is what I am doing too). However, just for discussion, I think this is a bear market really and I think there is more pain ahead and this is the reasoning:
– Right now investors are pricing in the fact that inflation has peaked and fed will start lowering interest rates in 2023. The problem with this is that even though gas prices have fallen a bit ( still not low as crude oil is close to $100 a barrel and natural gas is still higher than before ), inflation will still come very high. Let's say that inflation peaked at 9.1%, do we feel good if it will be 6-8% in the next coming months ? I personally do not think that having fed funds rates at around 3.2% will bring down inflation to the targeted area of 2 or even 3 %. Therefore, FED will be forced to keep raising rates even more than what is expected right now. The fact that also unemployment is so low is a nice cushion for them to keep fighting inflation and raise rates. IMO, once we start seeing the news of inflation being still high and FED being more aggresive, the market will start dropping making a new low or at least retesting the $360 area. Any thoughts ?
Leave a Reply