- Christian Armbruester
After last week’s first tangible sign that inflation may very well have peaked, is it time to pile into the stock markets? Maybe. There is no doubt that the largest, fastest interest rate hikes in history have done some damage. No one is borrowing at these levels to take a punt on Metaverse real estate anymore. That’s good. Some technology stocks with no earnings have also been pummelled to oblivion and stocks generally seem more fairly valued after the year’s sell-off. That’s even better.
The main problem continues to be geopolitical. The war in Ukraine and the associated energy crisis have sort of been ring-fenced with gas supply secured, and warmer weather brightening spirits. But, there is always next winter and no one expects a near term solution, with Taiwan looming large depending on the outcome. The mid-terms in the US are turning out to be everything no one expected, and the main event is only two years away now.
What about earnings? The consumer has been battered to shreds, and making up any budget shortfalls with credit card debt will be increasingly expensive. That does not bode well for corporate profits next year, and the question is how much of this has already been priced in? If the Fed is done tightening, nothing else really matters, and the markets will go higher. One number a trend does not make however, and we may want to see the next CPI print before betting the last mushroom.