Wall of Worry. Or is it more like a slope?
November 16, 2022
Wall of worry
- Best thing I've read all week is that the Fed can never say "Mission Accomplished" with the any US inflation print
- Central bank talk is a critical policy tool and the US Fed won't say anything else right up to the last moment where they need to take their foot of the pedal and pivot.
- RBA has already done this and since doing so, we've seen (some) capital raisings come back into the market and more volume go through on resi real estate.
- A bullish scenario on valuations:
- RBA has lead the way and we're seeing a slow-down in the pace of rate increases globally, the yield curve is taking a breather
- No Fed pivot but hard data finally showing some sign of shift
- Valuation recession over? Perhaps a more reasonable pace of rate increases doesn't cause major market dislocations any longer.
- Earnings recession potentially coming but we will only find out early next year at the next earnings period!!
- Major sell-pressure in the US with end of tax year in Sept
- All lined up for Santa rally? Ho ho!
- Still not out of the woods longer term, rates will keep going up, growth will start slowing down, businesses keep making more cuts, UE goes up. All bearish. Imagine if inflation picks back up.
- Things happen slowly then quickly. Not many instances in history where a soft landing have been managed successfully.