Always Have a Plan

There are 8 and ½ trading days left in 2022.  How was your trading year?  Did you do the “best” you could given the circumstances?  Did you learn a lot about the markets and your own reaction to headlines and violent moves?  To say 2022 was a brutal year for most would be an understatement.  It is rare when fixed income and stocks both decline 20% in a single year.  Many large cap stocks dropped 50% in 2022 from elevated valuations to more rationale ones as we sit here today.  But, we face headwinds going into 2023 on earnings given the Fed’s policy mistakes.  Yes, Powell is making a huge mistake right now, the same way he did thinking inflation was transitory and staying loose for too long.  Will he get lucky and we have a soft landing despite his poor stewardship?  Sheepishly said, I think so.

First, let’s discuss how myopic the Fed and its governor minions are constantly stoking the markets with inflation is stubbornly high.  Yes, year over year, it is 7% CPI.  If month to month continued to grow 0.5% to 0.6% it would stay that high for the following 12 months.  But it is not.  Core was up 0.3% in October and 0.2% in November despite shelter which is 1/3 of the total not yet showing the rental price declines which are happening but lag in reports.  Does raising another 50 bps in 2023 help CPI in any way at all?  To quote the Beatles, “Let It Be”.  Anyway, we can’t fix stupid and maybe it is more them jawboning to keep speculative juices from flowing, but it is counterproductive at this point.  In fact, they now have switched to the tight labor market, wanting layoffs to hurt consumers and allow employers the ability to hire at weaker wages.  Ok, so let’s hurt a couple of million workers to guess this fixes inflation.  Gotcha.