Market Update
Market Edge

Market Update Week of October 31 st , 2022

‘Rumor: Talk or opinion widely disseminated with no discernible source’

This is the definition of the word rumor.

Rumors are common in society as a whole but on Wall Street they are not only prevalent but can move markets instantly! One rumor that caused a lot of excitement on the street this week was that the Fed was reducing future rate hikes! It is surprising that this gossip took hold since Fed Chairman Jerome Powell has stated on numerous occasions that they plan on interest rate hikes until they can bring down the inflation rate.

Looking for even a modicum of good news, the markets continued a powerful rally, although we are of the opinion that what we are seeing is a ‘Bear Market rally’ on an oversold market. The Fed will, in our opinion, raise rates again later this week by another ¾ %.

Although the markets have seen a decent rally, public sentiment is witnessing the turmoil bubbling and boiling around them – Geopolitical events both abroad and at home, inflation and mortgage rates that have more than doubled (7% +) in the last 13 months. Public sentiment seems to be heading into a period of a self-fulfilling prophesy – “Things are bad and can only get worse”. Not good for politicians hoping to keep their jobs nor for the economy as well. How will this affect the Christmas buying season? What do you think?

Please remember that a recession is defined as a “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.” Depending on who you listen to a recession has begun or is about to. Not the best news for investors (yet).

There are indicators that this latest rally has not lost steam (yet), but we do not recommend moving out of cash (money market).

Throughout this website we talk about emotions – emotional buying and emotional selling. When the average investor (that’s not you, you’re reading this) watches what has been happening in the equity markets the last few weeks they want to jump back in or add more to their portfolio. After all aren’t the markets going up? Based on a myriad of indicators we watch the smart money is not buying into this hypothesis.

We still see the S&P 500 bottoming at @3,300 +/- at which time we should witness a ‘Panic Bottom”. This is where the average investor says “No Mas!” and throws in the towel.

Know that, as the Bible observes, there is a season for everything. Right now the season dictates being positioned in cash. As we follow, unemotionally follow, what our indicators are showing us, there will come a season to buy and we’ll keep you informed as to when. For now – stay in cash

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