Looking back in 12 months, I think Wednesday will mark a turning point.
What happened on Wednesday?
My prediction came true.
We got our mildest inflation reading in a long time and the markets took off like a rocket ship.
We were up 4% in just one day.
Since the Fed started tightening, I’ve been predicting that when they’re finally done, the markets will take off.
Why do I think that’s so important?
Businesses hate few things more than uncertainty because it’s impossible to plan around uncertainty.
Almost all businesses – big and small – borrow money to finance their operations.
If those businesses don’t know how much it’s going to cost to run their business (i.e. what the interest rate will be), then they’ll smartly sit on their hands.
At best growth will stagnate. At worst, they’ll atrophy and have to lay people off.
When the Fed rate increases end, so will the uncertainty.
And that means businesses will be able to plan to hire and buy and purchase (even if it is more expensive).
Mr. Market always runs to where the ball will be, not where it is. (Called a leading indicator in finance-ese.)
So when the Fed’s done, Mr. Market will run as fast as he can to where we’ll be when businesses can hire and buy and purchase.
And that will be far, far from here.
If you ask me, this week helped confirm my hypothesis.
(BTW this in no way influences our investment strategy. #alwaysbeinvested.)
