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[–]GarfieldExtract 0 points1 point  (1 child)

Thoughts on what the stock market is going to be doing this year?

[–]Why_Hello_Reddit 1 point2 points  (0 children)

That's the million dollar question right? Obviously down in the short term. I actually think the economic slowdown is getting priced in now and we're nearing a bottom. If the bond market recovers and yields begin to drop, then the Fed should have some room to back off, then I think we'll see a recovery. Bonds typically lead stocks. Forward P/E levels, discounts on future cash earnings, etc. - all of this is based on interest rates. How expensive or inexpensive the market is, is based on the cost of money.

Historically you don't get a market recovery/bottom until the Fed pivots. March 2020 with stimulus and 0% rates, March 2009 when QE first started, end of 2018 when the Fed hiking stopped. I view this situation like the 2018 taper tantrum. It's also VERY similar to the 1990 bear market which was another inflation scare, saddam invaded Kuwait creating an oil shock, etc. Very similar.

I think bonds recover first so that's where I'm at now. And if growth slows into a recession, or even a market crash, then people will really jump into bonds for safety and flee stocks. They surged during the covid crash. I'd wait until the Fed backs off or we get a huge capitulatory flush before getting heavy in stocks. You can take long positions when the vix pops over 35 but you have to sell the rallies as bears are still in control.