What is going to happen next?
Retail Jobs Losses were worse than the Covid Crash The Fed has been aggressively tightening monetary policy through interest rate hikes combined with quantitative easing. This is the most aggressive tightening since Paul "Tiny" Volcker in the early 1980s. But Jay "Rear View Mirror" Powell, Fed Head, has said that he is fine with that because the economy remains strong. Just look at the strong labor market. This is insane. He is looking in the rear view mirror to drive the monetary car! The labor market is a lagging indicator of the economy. He should be looking at the leading indicators which are telling us that we are going into recession. But then Rear View Mirror Powell has twice said that there would be pain to make sure that inflation is contained. So here is the question: Will the weak labor market cause Jay to flinch and stop the tight money policy? | |
shrug it off. But this figure is a good indication, along with all the other recessionary red flags we have highlighted, that we will start to see unemployment start to rise probably before the end of the year but certainly in the 1Q2023. It will be that that will stop the Fed from tightening no matter what inflation is. So I think we might have a Double Shuffle Recession. Here's what I mean. The Fed has already tightened enough to cause a recession later this year or 1Q2023. That will cause inflation to pause and possible come down slightly as raw material prices decline from the recession. But sticky inflation indicators, such as rents and employment costs won't come down right away so inflation may come down a little but will still be high. So then the Fed may pause it's easing policy. Powell has shown himself to be a Fed chairman that is reactive not active. He responds to headlines and doesn't seem to have a clue about how to predict the economy. What that means is that markets are going to be whipsawed by a herky jerky Fed. So how to we make money from this? | |
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Fortunately the herks and jerks will be long enough for us to profit from them. But is also means that trends will be shorter. I love to get into a trade and hold it for a long time so I can make big money. But I think the coming year will have less of those types of moves. Instead, we will get moves that last a month or two. That means we must change our strategy to one of taking profits most quickly. Which means we must try to call tops and bottoms. Generally, calling tops and bottoms is a mugs game. But try it we must. So I will bringing my techniques that call tops and bottoms into my trading toolbox in both my weekly video newsletter, Wall Street Winners (click here for more info) and the more intense daily Stock Navigator (click here for more info). | |
Words To Live By The Myth of Poker Talent by Alexander Fitzgerald "What these players possessed should be renamed. They didn't have talent. They had grit. Merriam-Webster defines the word 'grit' as "firmness of mind or spirit: unyielding courage in the face of hardship or danger." To me it is the breakfast, lunch, and dinner of champions. Without grit, you have nothing. If you Google search for the random articles I've written over the years you'll find my passages on grit to be the most reposted articles by high-stakes professionals. They recognize what took them to the top." | |
 | COURTNEY SMITH
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