The Stock Market has started out the year horribly, in fact, the worst ever. The selloff is due to the double whammy of Omicron and fears about the Federal Reserve raising interest rates.
Neither issues concern me. Omicron is clearly dissipating (epicenter UK has lifted restrictions) and the FED can’t significantly raise interest rates because they’re shackled with a long term anemic economy.
But you say, “muhhhh inflation!”
Sure, the FED printed nearly $5 trillion over the past two years and that has contributed to short term inflation. But…do you know what that $5,000,000,000,000 bought over the past two years? An average annualized US GDP growth rate of 1.06%. That’s about half the rate of the anemic growth that’s occurred over the past two decades.
Other than last year’s FED induced GDP growth, the US economy hasn’t grown at or above 4% since 2000. Non-coincidently that’s the year before China joined the WTO. (think about that)
The IMF has just downgraded 2023 US GDP to 2.6%. The bottom line is that post-pandemic, the US will return to its multi-decade lackluster economy. Therefore, unless the FED wants to throw the country into a recession (during a critical Democratic midterm election cycle) I’m extremely confident that interest rates won’t go up significantly.
Let me put this another way:
B U Y T H E D I P
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