This is the year most investors feared would happen, but knew it would come at some point. With the huge surge in liquidity into markets amid the economic uncertainties from a devastating pandemic, the Fed executed largesse over prudence. In other words, bestow plenty of liquidity, keep rates low until the situation normalizes. Without a timeline that seemed to be the easy part, but the worldwide economy is feeling the pain, or soon will.
There was no complaining in financial media circles when the money is flowing fast and into equities. Heck, it was hard to find a bear who did not get run over by a bull stampede over the past two years. But as we know and hear that flow of money is coming to a screeching halt. Inflation is here and with it comes the consequences of an easy money Fed policy. Time for contraction.
The noise around the markets is loud, distracting and sometimes obnoxious. It's difficult to know who to listen to and why. Is the spread of hope so strong that everyone needs to hear a message? Perhaps, but I'm here to tell you (again) the noise is going to lead you toward making bad choices. How many times have you heard recently that the bear market has bottomed and it is safe to enter back into the waters? Endless times, and yet we continue to make lower highs and lower lows on the chart.
I suppose there are always clues that can tie together and support a case for a market bottom: When the Moving Average Convergence Divergence (MACD) oscillator is oversold, stochastics are off the cliff, relative strength is at a bottom. But in all likelihood those arguments are bunk if price is not leading the way. The only piece of information you need is the market itself, telling you and showing you a turn has happened, not is happening.
Stay away from the views of those who refuse to listen to the market. If you do that, you'll find yourself in a much better place with more control than ever before.
