esInvests: Market Bottomed and Headed to Top in 6 Months
While many fear a further market decline, there are several reasons why investors could expect to see a recovery from here.
First, markets have been scared down by higher interest rates. With the Fed likely closer to ending its rate hike cycle at this point, that big fear could end. Second, we’re seeing signs in the credit market that a limit may have been reached. That could lead to easing conditions in the early part of next year.
There’s a strong chance that an easing in monetary policy will occur as inflation runs higher than expected.
That’s the good news. Looking beyond that next stage however, the economy could be in a rough shape.
That’s because the speed and extent of the latest interest rate hikes will likely lead to prolonged trouble in the bond markets. And the housing market is already showing signs of trouble with mortgage rates back to 15-year highs.
Investors should look for a rally on a central bank pivot. And such a rally may even lead to new highs. But that could also lead to a bigger bust later. Especially if inflation remains high and central bankers have to continually pivot back and forth on interest rates.
Ultimately, high volatility will remain for some time. But the worst may be over in the markets for now.