Economy

The Big Picture: Powell Should Declare Victory & Go Home

Posted on by Andrew Packer

2022 was a tough year. Investors saw both stocks and bonds decline by double digits for the first time in over 40 years. That’s led to the joke about 401k plans becoming 301ks.

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    • Other asset classes likewise took a massive dive. The only assets that fared relatively well were short-dated bonds – which still lost out to inflation. Or perhaps the US dollar, at least as measured in other currencies.

    It’s important to remember that these bad years occur every decade or so.

    Yet there doesn’t seem to be an end in sight. However, the past few crises have bottomed out in March. That includes the pandemic selloff in 2020, the end of the housing crash in 2009, and the end of the tech selloff in March 2003.

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    For now, it’s likely that stocks will continue to grind lower. That’s even as earnings have fared relatively well, especially with high inflation.  The reason? Interest rates continue to rise.

    More importantly, we’re seeing the fastest rise in interest rates in 40 years. With the Fed starting to slow with its December rate hike, it’s possible that the bank is done by the end of the first quarter.

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    • So investors should consider some more short-term pain, but we’re likely closer to the end than the beginning.

     

    To watch the full interview, click here.

     

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