12:00 TUESDAY – Stock Market Report #201 – 3/28/23
by Robert Holman | www.DefensiveAdvisor.com
STOCK MARKET RATING … 3.5 (0-4 bearish, 5 neutral, 6-10 bullish). I do not foresee a financial crisis at this time, but I do think the market will stay on a downtrend for a while.
Reports continue to persist that major US banks are discussing a rescue of First Republic Bank (similarly to the multi-bank rescue/dissolution of Long-Term Capital Management in 1988).
What a world we live in. The Fed did not see the logic in pausing it’s interest rate hikes. But to me, it would have been very logical – read the following twice, first without reading the parenthesis – it would be like approaching a intersection where a traffic accident had taken place (unintended bankruptcy), taking your foot off the gas petal (proceed cautiously), taking a look around and assessing the situation (pausing the rate hikes), then making sure to proceed with caution without causing another traffic accident (additional bankruptcies).
Life always makes more sense to me when I can relate it to something that exists in the physical world. All the Wall Street thought processes were about the Fed “being tough” or “saving face”, which to me, were a bunch of nonsense. The only way that toughness and saving face taken together exist in the physical world would be a war-type situation, and that just doesn’t make a good analogy in my view.
Price Stability - So once again, the Fed must stay the course until, as Chairman Powell says in his own words, that “rate hikes will continue until we get our inflation target comes down to 2% and stays there.” Price stability has been defined as ongoing 2% inflation for a significant time. Stability by definition implies little change over time. With time a key factor, rates could easily go much higher.
Maximum employment consistent with price stability – Since the rate of optimum unemployment means keeping it at levels that are seen in normal economic conditions when there is neither a boom nor a recession. That’s a much wider latitude for the Fed, and could mean that unemployment of 4.5% to 5.5% is acceptable until prices come under control. Only then can the employment pendulum swing back the other direction.
PORTFOLIOS … After reading this report, if you are unsure how to position your portfolio to take advantage of these conditions, call me to discuss your circumstances, I’ll do a complimentary portfolio evaluation, and I’ll explain what ought to be done to help your situation. If you want to get started right now, just click here and input your portfolio holdings and I’ll call you.
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Excelsior Divitiae. Learn from the Bible: Deuteronomy 10:14 and Psalm 24:1 (taken together), Genesis 12:2-3, Proverbs 15:22, 21:5, 22:3 and 27:12, Ecclesiastes 8:7, Joshua 1:9, Proverbs 3:5-6, Ephesians 1:17, Jeremiah 29:11, 1Chronicles 29:11-13, and 1 Chronicles 12:32. I recommend you read them in this order.
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