So far 4 Fed officials have come out on damage control duty to explain that interest rates will remain elevated throughout the year and one official said that rate cuts are highly unlikely for early 2023. On that news the ten year moved higher but the market seemed to not care. Around a week ago the market seemed to not care about the Core PCE data that surged higher to 4.8% in June which broke a 3 month downtrend. Jerome Powell explicitly stated that if Core inflation was to remain elevated or turn higher, the FOMC will continue hiking rates. Although there are signs of falling inflation such as the commodity price downtrend and slight evidence of supply chains easing, this discounts the fact that demand remains strong for most consumer goods albeit a little signs of slowing. Furthermore, there are still supply shortages for oil and service inflation is becoming increasingly out of control. Finally it's extremely difficult to understand why markets will rally when QE is slowly being taken away, rates are still rising, and stimulus from congress no longer exists. All of those circumstances I mentioned were used in 2020 which caused a market rally and higher revenue and profit growth for most companies. It seems highly irrational that equity markets will create a new ATH this year without the Feds help and even congresses.
Use this rally to sell off any companies you think will underperform in a potential economic downturn.
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