How to Make Sense of the Current Stock Market 11/18

After a healthy rally the past few weeks the S&P 500 is on pace to finish down about half a percent this week.

This is mainly due to the Federal Reserve tampering expectations of a decrease in future rate hikes.

This is the correct call by Jerome Powell and other members of the Federal Reserve.

Yes, inflation fell more sharply in October than it has in other months recently. But we are still facing 7.6% inflation year of year in October.

That is well above the Fed’s target rate of 2.5-3%.

Ryan’s Market Outlook

Looking at the different macroeconomic factors I anticipate the Fed will increase rates by 50 basis points next month.

A smaller increase than the 75 basis points it has been raising rates by recently.

Home prices and rents are still high relative to where they were a year ago but those typically are the last prices to fall in this environment.

We are seeing some relief elsewhere as the Ukraine conflict looks to deescalate. This should help food prices worldwide as Ukraine is a major exporter of wheat and grain crops.

That will give consumers some much needed relief.

I do believe we are closer to the end than the beginning of tampering inflation. I fully expect by the end of the first quarter of 2023 we will see the Fed stop increasing rates.

As, they realize inflation is stabilizing I look for them to pivot to decreasing rates in the late spring/early summer.

Rates decreasing helps to increase the money flow in the economy and generally bodes well for stock market returns.

As a refresher, you should reread my post on how to invest during periods of high inflation.

We should soon transition from high to moderate inflation and then hopefully stabilize around the target range by summer 2023.

This will be attractive for the bond and stock markets. For those of you holding cash on the sidelines start looking to deploy it in the coming months as I see you being able to capitalize on a rare market opportunity.

And if you have questions, please reach out to me.

What is your outlook on the current market?