The open nears and I want to get a few thoughts down.
Rate hike expectations are falling. Bonds are rallying off recent lows, and interest rates have cooled their recent ascent.
Yes, as I have stated previously numerous times... 4-4.5% on the 30 year mortgage is going to stop price appreciation in its tracks. We arent there yet but we are close. Above that 4.5% -5% and we could start to see prices come back. Over 5% for any length of time will put the most recent hot housing market in the rear view mirror.
Better lending standards and likely more deals done with more cash will soften the blow this time around. But we could be seeing a market where house prices are below current outstanding mortgages down the road. Something to watch for.
And of course higher interest rates bring up the cost of capital. Companies that are losing money every quarter aren't being given the long rope like in years past. This market is so smart and saw this coming over a year ago.
For all intents and purposes, there has been a bear market in growth stocks for nearly a year now.
The question now, will it spread to mega caps, AMZN MSFT AAPL GOOGL, or will they be the bastions of safety?
No doubt this ugly war in Ukraine has put outlook into limbo. Crude oil is soaring in a 2008 esqu type way. Inlfation continues to soar.
However is this crude rally FED induced? Grains rocketing higher... i s this FED induced.
We've gone some 14 years of unprecedented Central bank policy. Clearly the pandemic helped fan the flames of this long awaited inflation.
However will a few rate hikes snuff it out quick?
I think so. I think like all dips the market has seen, this one too will get bought. Down the road stocks will be trading at record highs again and no one will remember just how ugly this felt today.
All of these nasty corrections feel like the long awaited crash is finally coming. And yet each time... the markets reverse higher.
Perhaps it will be different this time. Long term there is a looming H&S pattern.
Will it break?
Stay tuned.
IS this 2008 all over again? I'm sure we will have many saying that, if they havent already.
Even in 2008 there was time to prepare for those proactive on the market.
If this is indeed the early stages of a massive pull back, there will be time. Lets see this H&S break for good first.