aussie market drop 13.2% over the next 2 years
How Far Do You Trust the Fed?
US Federal Reserve logo on noteIt was a truly nightmare week on the markets. If you trust the US Fed to be able to smoothly unwind its emergency low-interest rate policy without crashing a market bloated on low rate-driven investment, then you probably aren’t worried. If you don’t have that much faith in the Fed, you might see them as having painted themselves into a corner.
This is Normal Market Behaviour
global marketsYou’ll read a lot of sweeping statements now as markets correct, but markets are just fully extended right now. Stock market corrections are completely normal. So just be wary when reading some analyst who suggests things are on the verge of collapse. Concerns over inflation and rising interest rates may have sent stocks tumbling, but underneath it all, the US economy remains strong.
Australia, You Have Problems…
aussie market problemsYesterday’s sharp fall below support at 6,000 points (and back to where we were three or 10 years ago) suggests a certain malaise in our economy. Australia has deep seated problems that go well beyond a one-day stock market panic. Let me explain.
A Simple Way to Profit from the Correction
correction and profiting from the downturnWe could be at the start of a shift in investor sentiment. It’s a shift that now acknowledges P/Es are too high, given we’re in a rising nominal rate environment. So while rising rates won’t derail the economy, they will derail investor sentiment. Which means P/E contraction will be the driving force behind this correction. So how should you invest accordingly?
The Downside of Leverage
leverage in the marketsThe risk is that that all this printing of money leads to inflation. I think that’s what the bond market is reacting to now. However, over the past two years there has been no volatility at all. The highly leveraged global economy has been good for global stocks.