I just wanted a quick dip, profit and exit.... I'm literally stuck with too much capital on too much risk. But in the process I did wake up and realize the potential beauty and deadly possibility of our new favorite drug -- rate increases!
If one is to weigh the potential for a recession now vs a month ago, between Ukraine and the subsequent rising gas/food prices, and Powell's comments on how we're going to beat inflation even if we have to kill the economy to do it, recession seems near certain by the end of this cycle (they will most certainly raise rates too fast eventually). However, the rest of the year may be a string of bad newses punctuated by rate increases that will inject some relief into the markets. And that is the potential lesson here and the message from the market right now:
Powell says to look at short term interest rates for signs of a recession. Short term interest rates are most sensitive to rate increases and least sensitive to the potential for future rate increases. Are the curves flattening? Yes. But a 5 yr bond is judging the rates over the next 5 years, a 10 year, over the next 10 years. A 6 month bill for example, on the other hand, is only concerned with anything that can happen in the next 6 months. So whether or not you follow Powell's advice to ignore the longer dated treasuries/curve is up to you. A lot of the market moves this week have been signaling something else: Sure recession, but not yet! And that may continue throughout the year. Doubtful we'll get ATHs but could frustrate many that try to time the market.
And trend reversals where 1 or 2 basis points makes all the difference are mean and violent. I really don't want this....
If one is to weigh the potential for a recession now vs a month ago, between Ukraine and the subsequent rising gas/food prices, and Powell's comments on how we're going to beat inflation even if we have to kill the economy to do it, recession seems near certain by the end of this cycle (they will most certainly raise rates too fast eventually). However, the rest of the year may be a string of bad newses punctuated by rate increases that will inject some relief into the markets. And that is the potential lesson here and the message from the market right now:
Powell says to look at short term interest rates for signs of a recession. Short term interest rates are most sensitive to rate increases and least sensitive to the potential for future rate increases. Are the curves flattening? Yes. But a 5 yr bond is judging the rates over the next 5 years, a 10 year, over the next 10 years. A 6 month bill for example, on the other hand, is only concerned with anything that can happen in the next 6 months. So whether or not you follow Powell's advice to ignore the longer dated treasuries/curve is up to you. A lot of the market moves this week have been signaling something else: Sure recession, but not yet! And that may continue throughout the year. Doubtful we'll get ATHs but could frustrate many that try to time the market.
And trend reversals where 1 or 2 basis points makes all the difference are mean and violent. I really don't want this....
I usually try not to tell you what to do -- too crowded there. I'll point out what price points/trends/patterns the pros are looking at and let you interpret what that means for your portfolio.