Marc Cuniberti Although late last week saw some serious green in equity prices, confusing action in the markets continues to plaque investors. Inflation has backed off a tad in only a few areas, gasoline being one of them. For the most part, however, the bite of ever-increasing prices is chomping at the checkbooks of consumers worldwide.
Protests against higher prices are popping up in a handful of countries. The raising of interest rates by central banks worldwide to combat inflation is likely what is driving the markets.
In an interesting observation, the U.S. government seems to be doing battle with the Federal Reserve’s war against inflation. While the Federal Reserve is trying to sop up excess cash in the system by raising rates and instigating programs to remove money from the banking system, Washington dumped about another 4 trillion onto U.S. consumers within the last two months through multiple spending programs.
Ironically, one of those programs was called the “Inflation Reduction Act.”
You can’t make this stuff up.
Because of this massive government spending, both past, and present, various analysts are warning of more pain to come. This analyst agrees that inflation is far from tame.
At some point, all this inflation and interest rate chatter we hear on the news will cease to affect markets as investors yawn louder and louder with each news flash.
Historically, market participants become numb to the same bad news over and over again. That’s when markets sometimes stop their reactionary descent and healing can occur as buyers finally step forward. I remind readers, that for stocks to rise, the news doesn’t necessarily have to be good, the news just has to stop being bad. We may not be there yet, but we are getting closer with each passing day.
In world news, Queen Elizabeth II passed away on September 8th. I don’t think that will affect markets much but British investors may slow down a tad as the ten-day mourning process begins.
More news on the electric vehicle (EV) market as startup companies both here and abroad stretch their pocketbooks into the red trying to catch EV leader Tesla. Investors often ask me if they should buy one or more of these EV startups in hopes of catching a Tesla-like price explosion. My response is why buy a startup that’s trying to catch a dominant leader in a difficult market as the automobile is.
In my opinion, not all EV newbies will survive. I recall the DeLorean Motor Company startup which began in 1975 and ended seven years later. It’s very difficult to start an auto company, not to mention exorbitantly costly. My vote amongst the EV auto group remains with the industry leader, Tesla.
The housing market continues its slow-motion train wreck with mortgage rates rising to levels not seen since 2008. Add in the damage to consumer pocketbooks from the worst inflation in 4 decades and home affordability is fast eroding.
Although not cratering as of yet, prices will soon start down as dominoes fall into each other. (https://www.newsweek.com/house-prices-go-down-prediction-economy-experts-1728298). We are already seeing failures of some mortgage companies reminiscent of 2008. (https://www.yahoo.com/now/us-mortgage-lenders-starting-bankrupt-120000031.html).
Not to be undone, however, mortgage lenders are back to offering low or no down payment loans, adjustable rate mortgages, and lending to buyers whose income and credit status may be sub-par.
Oh boy, here we go again.
Bitcoin looked as if it was on its way to recovery after its recent fall into the 17,000’s range. In my previous articles on Bit, I was of the opinion it was nowhere near done on the downside. With its recent retracement back under 20,000, I am still of the opinion that coins like it are “vapor”, run by folks of unknown repute, who are likely much smarter at computers than the majority of Bit buyers. All this with little oversight by governmental agencies.
A potentially lethal combination.
As we progress through September, I remind investors that this particular month holds the record for the poorest performance. Not that it will be again, but it has been. So far however, stock Armageddon hasn’t occurred.
Hope springs eternal.
“Watching the markets so you don’t have to”
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(As mentioned please use the below disclaimer exactly) THANKS (Regulations)
This article expresses the opinion of Marc Cuniberti and is not meant as investment advice, or a recommendation to buy or sell any securities, nor represents the opinion of any bank, investment firm or RIA, nor this media outlet, its staff, members or underwriters. Mr. Cuniberti holds a B.A. in Economics with honors, 1979, SDSU, and California Insurance License #0L34249. His website is moneymanagementradio.com, and was recently voted Best Financial Advisor in Nevada County. 530-559-1214
