The market is in a very defined downtrend, and we are holding high levels of cash and hedge. This morning’s CPI (Consumer Price Index) number was a disaster. Wall Street’s hopes that the Federal Reserve might be able to ease up on its battle against inflation later this year were decisively dashed Thursday when consumer price index data for September came in unexpectedly hot. Core CPI, which excludes food and energy, increased 6.6% from a year ago, the highest level since 1982.
There can’t be anyone left in the market who believes the Fed can raise rates by anything less than 75bps at the November meeting. In fact, if this kind of upside surprise is repeated next month, we could be facing a fifth consecutive 0.75% hike in December, with policy rates blowing through the Fed’s peak rate forecast before this year is over.
The futures market sold off hard this morning but staged the way for the rally which occurred shortly after. Unfortunately, after 7 down days, we believe this is most likely just investors covering their short positions, and once that fades so will the market. Almost identical to what happened on Feb 24th when Russia invaded Ukraine.
One of the questions I have been asked the most in virtually every conversation for the past two months is about the mid-term elections. I have been saying people vote by their pocketbooks, and no one, and I mean no one, is better off than they were 12-24 months ago. It is simply impossible when inflation is at a 40-year high. Everyone is paying the price. The rich are less rich, the upper-middle class is dropping down to the middle class, the middle class is dropping to the lower-middle class, and the poor are just plain suffering.
Remember, elected offices are no more than your employee. In other words, they are a well-compensated manager. Ask yourself if your employee/manager in your district is doing the job you hired them to do. If not, maybe it's time to find a new manager in your district.