- The price action is screaming further upside
Last week saw a collapse, a tremendous turnaround that suddenly looks like a runaway bull market? The price action is screaming further upside. The only caveat being continuing heavy question marks over the state of the economy and the prospect of continued aggressive rate hikes.
The bulls of course have an entirely different view on both points. Mostly hinged around the idea that US rate hikes will take a pause toward year end, and the economy will bounce back.
US consumer confidence and industry activity data is clearly softening and this is coming on top of a negative first quarter GDP result of -1.5%. So not a strong economy by any means. There is hope, but the rate of interest rate hikes is going to have a very real world impact on small and medium sized businesses as well as generating significant mortgage stress over the next 1-3 years.
The Federal Reserve may pause at some point to see how the economy is coping with the additional burden of higher rates, but it will not stop for long in its pursuit of extreme inflation.
Markets may want to forward look and discount rate hikes, but in the real world on Main Street they are only just beginning to bite.
We saw a 400 to 500, point rally in US500 index a couple of months ago, which resulted in a return to downward momentum and fresh lows.
Excited upward price action to be sure. ‘Sustainability’ remains problematic.