Still Lower to Go

S&P 500 slide continues as the hawkish Fed gets digested – stocks don‘t like it, and neither do bonds. Given the steep pace of Treasuries‘ slide, we‘re though closer to a bottom there than in stocks, which could continue selling off still some more. For now, it looks as if the Feb-Mar S&P 500 lows would be tested with ease. Nasdaq continues underperforming, and for good reasons – value can‘t save the day, and neither can rotations into non-cyclicals. The real economy is slowing down, the Fed is hawkish (markets are pricing in more hikes than were hinted at on Thursday), and inflation continues being a major issue – markets don‘t like that. The USD catches a bid, and real assets start feeling the heat, especially for the below given reasons plus some deleveraging.

Miners turned down hard on the Fed pronouncements, and Friday‘s close points out vulnerability in both gold and silver, and quite a few commodities at large. Demand destruction is clearly the fear here, even if medium- and long-term prospects of real assets remain excellent. The only question is when the Fed would have to make a U-turn, and back off tightening as a minimum – would that be early autumn, or when this year exactly? For now, inflation (which won‘t be tamed, but would make a local peak and slow down its ascent) is in the spotlight, and not a growth scare. At this time, there isn‘t yet enough slowdown in the real economy to trigger these fears, so commodities have nothing to sense yet (in terms of the Fed turn) in advance. Real asset bulls, taper the appreciation expectations in the short run, that‘s the most sensible takeaway – the upcoming turn in bonds that would send USD down, would be a positive milestone.

There won’t be a regular analysis featuring charts or Twitter activities today, but I’m keeping a close eye on the markets and will issue a sound commentary whenever required by the markets on my watch. Especially the closing prices and volume of today’s session would be insightful – it’s unlikely we’re making a local bottom in real assets today though.

Thank you for your patience.

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Monica Kingsley
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All essays, research and information represent analyses and opinions of Monica Kingsley that are based on available and latest data. Despite careful research and best efforts, it may prove wrong and be subject to change with or without notice. Monica Kingsley does not guarantee the accuracy or thoroughness of the data or information reported. Her content serves educational purposes and should not be relied upon as advice or construed as providing recommendations of any kind. Futures, stocks and options are financial instruments not suitable for every investor. Please be advised that you invest at your own risk. Monica Kingsley is not a Registered Securities Advisor. By reading her writings, you agree that she will not be held responsible or liable for any decisions you make. Investing, trading and speculating in financial markets may involve high risk of loss. Monica Kingsley may have a short or long position in any securities, including those mentioned in her writings, and may make additional purchases and/or sales of those securities without notice.

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