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Originally Posted by RPDaly
Absolutely in a bear market rally. Not uncommon. Happened during the Tech Bubble and 2008 Financial Collapse bear markets multiple times. Might even be labeled a dead cat bounce
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I agree with those that suggest we are in a bear-market rally.
Our government has flooded our economy with trillions of dollars and has just added another $700+ billion. To label the most recent helicopter money as the “Inflation Reduction Act “ is pure folly.
Households in the lower income quartile and those on a fixed income (some retirees) are always the hardest hit when inflation spikes. Especially, if it runs red-hot at 8-9%. The next quartile of lower middle class to middle class households have or are on the verge of depleting any savings they may have been able to accumulate during the pandemic. At some point, the upper middle class will follow suit. Many potential homebuyers are finding it difficult, if not impossible, to purchase a new home as the interest portion of their new proposed mortgage has doubled. The housing industry has recently declared that they are in a recession. Walmart disclosed that their wealthier clientele are now price-shopping.
Ultimately, inflation will become the tail that is wagging the dog (equities) as more and more income will be devoted to essentials. Yes, incomes are up but it can’t keep up with inflation running at at 40-year high. I don’t believe we have tested the lows as the Fed has no choice but to continue to raise rates substantially to tame the inflation beast. Unfortunately, this often leads to a recession and a hard landing.
IMO, defense is the game to play as opposed to chasing a bear-market rally.
One caveat: I could be way off base and completely wrong. Time will tell.