If you or someone you know is invested in the stock market - individual stocks, mutual funds, IRAs, 401Ks, 403Bs, Roth IRAs, etc., it is in your best interest to pay very close attention to what is currently transpiring in the major indexes.
On August 21st, I posted that I would begin to offer my opinions and updates on market conditions.
I, as many of you know, was a stockbroker during my career as well as a Registered Investment Advisor (RIA). I am no longer registered or affiliated with any regulatory body or brokerage firm. I do not intend to be, however during my career I followed many indicators in order to properly manage my client's money (the debacle at Watermark notwithstanding).
Beginning October 1st, 2022, I will be charging those interested in my outlook $250.00 per year. I intend to post at least once per week. When necessary, more often.
If you have read this far, please read on for my outlook on the week ahead:
As I wrote last week, interest rates will continue to rise, and this is one of the biggest (in my opinion) reasons the market will continue to decline.
The Federal Fund rate is what is referred to in the news when they say the "interest rate".
The Federal Fund, for those who are not familiar, is what banks charge each other for uncollateralized, overnight loans. These rates are a foundational part of banking activity and, as you are now witnessing, have a major impact on the economy.
Putting things into perspective before I continue, after the financial meltdown in 2008 the Fed set its target range between 0% and 0.25% and ‘float’ somewhere in between. In August 2010 the rate was at 0.19% due to global conditions. By August 2013 the rate had reduced to 0.08%.
Please stay with me here (I promise not to get too technical!)........
The current Federal Fund rate is 2.5% which is why we're seeing the current volatility. The Fed appears to be poised to rise as much as 0.75% - 3/4 % on short-term rates this month. That my friends are a MASSIVE rate hike!
Additionally, according to a report, I read earlier this week, a member of the Federal Open Market Committee, which sets rate policy, is of the opinion that the Fed rate will rise to OVER 4% by early 2023 AND STAY THERE!
Let's look at this – Currently, the rate is 2.5% (9/2/22). The rate could go to 3.2% this month. And it's not done?!? BTW – last year at this time the rate was 0.25%.
What does this mean? The market drop in my opinion and analysis is nowhere near an end.
Going back to my post on August 21st:
“The S&P 500 closed at 4228 on Friday (8/19/22) and I see this going down. Ditto for the Dow-Jones which closed on Friday (8/19/22) at 33,706.........."
This past Friday (9/2/22) the S&P500 (the best indicator of the stock market in my opinion) closed at 3,924. That’s DOWN 304 points in TWO WEEKS!!
The Dow Jones closed on Friday (9/2/22) at 31,318, DOWN 2,388 points in TWO WEEKS!!
This folk is a drop of over 7% in TWO WEEKS!
Small Caps are down 4.7% for the week. The NASDAQ is down 4%.
I will have more in a few days because even I am nauseous writing this.
Please consider moving into or staying in Money Market accounts for the time being. This drop is NOWHERE NEAR OVER………….