Mohamed El-Erian is one of the few people you really want to listen to on the direction of the economy. He's been saying for many months that The Fed was behind the curve on attacking inflation. That had him worried that they would have to "slam the brakes on" at some point, raise interest rates dramatically, and... here we are, at that point.
The F.O.M.C. meeting (Fed governnors), is Tuesday and Wednesday, July 26 & 27, and they are expected to announce a .5% to .75% hike in the Fed Funds rate Wednesday afternoon. But the recent, much higher than expected inflation rate, has led to rumors of a 1% interest rate hike. That would be historic, and the stock markets could react poorly, particularly after this recent rally. At this point, a .75% hike in the Fed Funds rate seems most likely. But someone seems to have floated a rumor that The Fed might lower rates, and go back into bail out mode for stocks (and everything else). With inflation as high as it is, that seems pretty much impossible. That would just drive inflation much, much higher.
Then, at close of the stock market on Thursday, July 28, Apple will announce its earnings, followed by its quarterly conference call. Because of the way both the Nasdaq and the S&P 500 are weighted, Apple has a huge effect on both, and has been holding up both averages during this summer's tech bear market, though down around 14% recently, from the peak. But signals are that Apple expects lower earnings and slower growth in future months, for multiple reasons. If Apple's numbers and conference call are worse than the expectations of traders, than that could also have a big, negative effect on the markets. If stocks take a dive, which is very possible, crypto could do the same thing, and drop back some as well.
These two things give the potential for a really negative week in stocks, and some carry-over negativity in crypto.
Blogger's note- 7/28/2022- 2:30 pm, Pacific time, 5:30 Eastern- So... Stocks dropped some Monday and Tuesday, before the FED (FOMC) meeting announcment. On Wednesday, The Fed hiked the interest rates by .75%, making loans of all kinds more expensive and harder to get for everyone, and the stock market rallied. Today, Thursday morning, we found out that, yes, by the actual definition, we are in a recession, two quarters of GDP contraction. But it doesn't matter, because Uncle Jay and Aunt Janet say that there isn't REALLY an actual definition of "recession." Stocks rallied again, since the economy will get worse, but we don't call recessions recessions anymore.
Then after market close, Apple beat earnings, crisis averted, so everybody pile into the rally tomorrow! Maybe. If you own stocks, just follow the rabbit down the hole and smoke whatever the worm on the mushroom is smoking, and life will be great. Just don't try to sell your house for the price they sold for 3 months ago, if you're market was hot last year. Tragedy avoided, and I feel like I've walked into a rave where everyone is on E but me. New soundtrack for stock trading... Hey, it's the end of July, we have five months left in 2022, and I'm sticking with my March 22, 2022 predictions for stocks. But who cares? Nobody reads these updates. Time will tell what happens. And whatever you do, don't listen to Ray Dalio, Jim Rogers, Robert Kiyosaki, or Michael Burry. And here's Joe Brown of Heresy Financial, making fun of people saying this recession is not a recession. Absurd, yet flacid.
Check out my Pinterest page
No comments:
Post a Comment