The fear is becoming overwhelming

“Don't fight the Fed”.

I'm sure we've all heard this multiple times in the past 10+ years. Whenever the market grinded higher, despite whatever had caused it to go down initially, people would say “Don't fight the Fed.”

Now, the Fed is reversing its easy money policy, raising interest rates, and starting QT. So if the logic remains the same, should we not fight the Fed? Instead of buy the dips, it seems like we should sell the rips.

The market environment is completely different from the past decade+. For the first time in a long, long time, we have inflation that isn't going away.

1. The war in Ukraine is exacerbating food and fuel inflation. Even if the war stops tomorrow, inflation won't just magically go down. It will take months to play out.
2. Supply chains are still messed up. China has locked down major cities like Shanghai, and their 0 tolerance policy on Covid doesn't seem to be changing any time soon. This is also worsening the inflation issue.
3. The Fed has no choice but to raise interest rates. The economy is still “strong” and unemployment is low, so they will keep raising until something changes.
4. Beyond raising interest rates, they are also starting QT, effectively sucking money out of the system (the opposite of QE).

We haven't had a situation like this before. “This time is different”. The fear is palpable, and I know many people don't know what to do right now. I'm not sure how this situation reverses itself any time soon. There's too much contagion in financial markets.

Is this the start of a secular bear market like we saw from 1966 – 1982, or 2000 – 2009? How does this situation get better from here? I'm just not seeing it.

EDIT: I would also like to add, I am a firm believer that the stock market has an intrinsic value, and it can go up without the Fed printing money or setting interest rates lower. The problem is, without Fed intervention, I don't see why P/E ratio's should be higher than 15x on the S&P (Assuming interest rates above 3% – which the 10Y is already at). This is the historical average.

For 2022, EPS estimates for the S&P this year are around 240. So 240 x 15 P/E = S&P 3600. This is assuming no recession. If we get a recession and EPS comes in at 200, then we could easily be looking at S&P 3000 or lower.