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 In The Lonely Bull

After the latest meeting this week, the Federal Reserve announced another rate hike. It was .05%, a little less than the 4 previous increases. This was widely expected. However, the Fed Governors signaled that rates would need to go higher and stay elevated for an extended period. What disturbed some investors is that they laid out a path on further raises that would take fed funds above 5%. This is more than anticipated. It was the Grinch instead of Santa Claus!

Of course, the Federal Reserve does not have clairvoyance any more than anyone else does. Inflation looks to have peaked and is now trending down. Some aspects of inflation, especially wages, are not yet responding. Remember, wages do not need to decline to reduce inflation, they just need to stop rising. This seems possible in 2023. Job growth is waning, and some firms are already shedding workers. For many workers, it is already not as easy to get another job. The fear of recession and further layoffs may also make workers more cautious about demanding higher and higher pay.

The Bull and his partners still feel that a soft economic landing is possible next year. Yes, a recession is possible, but a mild one is already built into expectations. At any rate, interest rates may not need to go as high as contemplated today; we shall see. Bear markets do not last indefinitely. This one is already older than the average one. Stock market recovery will come, and it may not be so far away. Stay steady my friends.

 The Lonely Bull

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