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Goodbye January Effect. Hello Disaster.
Should we sell our stocks in anticipation for a stock market crash, or double down? Is there still a chance of the January Effect taking place?
🚀 Join the VIP Membership Group (Discord) today! ► elblancofinance.com
The FED is being hawkish. They are doubling the pace of tapering and will complete it by mid-March. After the taper is done, the FED stated that their preferred method of contractionary monetary policy would be to raise rates, rather than to use Open Market Operations / Quantitative Tightening (aka, selling bonds = the opposite of Quantitative Easing). This means that they could raise rates much sooner than expected. They also explicitly stated that their proposed course of action could potentially result in "financial stability risk" (= recession ?). No bueno.
How am I reacting to this? Something seems off to me. First of all, this information is nothing new. We've known about inflation for a while. We know with relative certainty that Omicron will take over the planet and disappear within the next 6 months. We also have a sufficient idea of how that's going to affect supply chain issues. Second of all, I analyzed the severity of these factors in depth. And yesterday, I was cool with buying the dip. Therefore, what has changed? My conclusion is that the ONLY THING that has changed is the FED's stance. People are only freaking out because of the potential for more contractionary monetary policy than expected, not because of the factors in question. I'm more concerned about the market's reaction to what the FED said, rather than what the FED is actually doing. The market is in panic mode. Keep in mind, the FED is only talking about tightening. They haven't actually tightened yet, and I believe there still is a chance they might soften as we approach the end of the taper. To me, this feels like a "fundamentals" vs "stock price" type of situation. Which one will it be? Which one is right?
Right now, I think the market is completely ignoring fundamentals. I'm keeping a cool head. I'm looking at the data. And I'm seeing is that the market is overreacting. I think that inflation fears are overblown. I agree with the market's expectation that inflation will stay at 2.5% over the next 10 years. I also believe that the North American economy is robust. Retail sales and ISM manufacturing is still strong. Look at the yield curve. It is actually steepening, not flattening, which is an indication of near-term growth in the economy. I think that supply chain shortages will subside throughout 2022, which will bring deflationary pressures on goods.
One thing is for certain, I will paying VERY close attention to the markets in the upcoming days and weeks. Huge discounts might be on the way, and I want to be ready to jump on those opportunities when they happen. When numbers don't matter anymore, that's when you know that you are in an irrational market.
I'm not going to let short term noise like this shake me out of my positions. For me, buying these discounted stocks FOR THE LONG-TERM is a no brainer. Focus on high conviction stocks
➔ Shakepay: https://shakepay.me/r/CVW9C8R
➔ BlockFi Interest Account: https://blockfi.com/?ref=501dfe31
DISCLAIMER - The content in these videos shall not be construed as financial advice. It is your responsibility to verify all information yourself. This is a Youtube video for entertainment purposes ONLY. Do not make investment decisions based on our videos. No copyright infringement is intended.
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By ElBlancoShould we sell our stocks in anticipation for a stock market crash, or double down? Is there still a chance of the January Effect taking place?
🚀 Join the VIP Membership Group (Discord) today! ► elblancofinance.com
The FED is being hawkish. They are doubling the pace of tapering and will complete it by mid-March. After the taper is done, the FED stated that their preferred method of contractionary monetary policy would be to raise rates, rather than to use Open Market Operations / Quantitative Tightening (aka, selling bonds = the opposite of Quantitative Easing). This means that they could raise rates much sooner than expected. They also explicitly stated that their proposed course of action could potentially result in "financial stability risk" (= recession ?). No bueno.
How am I reacting to this? Something seems off to me. First of all, this information is nothing new. We've known about inflation for a while. We know with relative certainty that Omicron will take over the planet and disappear within the next 6 months. We also have a sufficient idea of how that's going to affect supply chain issues. Second of all, I analyzed the severity of these factors in depth. And yesterday, I was cool with buying the dip. Therefore, what has changed? My conclusion is that the ONLY THING that has changed is the FED's stance. People are only freaking out because of the potential for more contractionary monetary policy than expected, not because of the factors in question. I'm more concerned about the market's reaction to what the FED said, rather than what the FED is actually doing. The market is in panic mode. Keep in mind, the FED is only talking about tightening. They haven't actually tightened yet, and I believe there still is a chance they might soften as we approach the end of the taper. To me, this feels like a "fundamentals" vs "stock price" type of situation. Which one will it be? Which one is right?
Right now, I think the market is completely ignoring fundamentals. I'm keeping a cool head. I'm looking at the data. And I'm seeing is that the market is overreacting. I think that inflation fears are overblown. I agree with the market's expectation that inflation will stay at 2.5% over the next 10 years. I also believe that the North American economy is robust. Retail sales and ISM manufacturing is still strong. Look at the yield curve. It is actually steepening, not flattening, which is an indication of near-term growth in the economy. I think that supply chain shortages will subside throughout 2022, which will bring deflationary pressures on goods.
One thing is for certain, I will paying VERY close attention to the markets in the upcoming days and weeks. Huge discounts might be on the way, and I want to be ready to jump on those opportunities when they happen. When numbers don't matter anymore, that's when you know that you are in an irrational market.
I'm not going to let short term noise like this shake me out of my positions. For me, buying these discounted stocks FOR THE LONG-TERM is a no brainer. Focus on high conviction stocks
➔ Shakepay: https://shakepay.me/r/CVW9C8R
➔ BlockFi Interest Account: https://blockfi.com/?ref=501dfe31
DISCLAIMER - The content in these videos shall not be construed as financial advice. It is your responsibility to verify all information yourself. This is a Youtube video for entertainment purposes ONLY. Do not make investment decisions based on our videos. No copyright infringement is intended.