Retirement Lifestyle Advocates
We are living in an interesting time, to say the least. Stocks and bonds are in a bubble. Regardless of the reason given for the decline in stocks by the pundits, overvalued assets eventually return to their real value.
With the Russian invasion of Ukraine, the Federal Reserve may now slow the taper. As noted in an article this past week by Lance Roberts, it would not be the first time the Fed used geopolitical risk to reverse or soften monetary policy.
With inflation raging at levels not seen in 40 years, the Fed’s inaction is curious.
The economic headlines last week were dominated by inflation, which has been the story of late.
As mortgage rates rise further, more and more people are throwing in the towel, and fewer and fewer people are desperate to lock in those now higher mortgage rates, which then translates into the decline in demand.
The double top theory for stocks that I called at the end of 2021 and have been discussing this month still looks intact despite a bit of a rally in stocks last week.
The double top theory for stocks that I suggested at the end of 2021, is looking like the right call at this point. Stocks suffered their worst week since March of 2020 last week despite a 4-day trading week.
While it remains too early to tell, there are many signs that the stock market may be ready to decline. It is my view that most of the gain in stocks seen since the financial crisis of a dozen years ago is attributable to the artificial market environment created by the easy money policies of the Federal Reserve.
My ‘double top’ theory from last week is holding true so far, but we will wait and see. At this point, it’s too early to tell. Bonds had a simply dismal week last week. The yield on the 30-Year US Treasury Bond spiked from 1.90% to 2.11% as bond prices fell hard.
January is typically an important month in the markets. Stock performance in January often accurately forecasts stock performance for the year. I will continue to monitor and comment.