Strange Bird of Sentiment
The week started with the notion that Federal Reserve and other central banks face a "daunting challenge" in their efforts to tackle high inflation. By the end of the week there was a feeling that the Fed will not do so bad. Best week for stocks for quite a while.
Jim McDonald, Northern Trust Asset Management Chief Investment Strategist & Kristina Hooper, Invesco Chief Global Market Strategist visited Wall St Week.
We’ll skip another guest: Blow Hard Summer. The 4-day week ended up…because a sentiment that maybe recession wont be so long or bad because of what the Fed is doing. Especially effecting mortgage rates. Still There is plenty of danger from China and Russia.
Said Kristina Hooper:
I would argue that we'll still be able to avoid a recession in the United States. And one could argue that that's what the bond market is telling us. The spreads between the two year and the 10 year yield are still positive even though they flattened a lot. There's a very big positive spread between three month and 10 year yields which some might argue is an even better indicator of whether or not we go into recession. So clearly pricing a slowdown. But I don't believe a recession.
Meanwhile, in Wall St Journal, Roger Aliaga-Diaz, chief economist, Americas at Vanguard and a principal in the firm’s investment-strategy group, said that the 10-year Treasury yield had finally reached a roughly fair-value level. Some, though, warn that there is likely more pain ahead for bonds.
Hooper expects forward looking market makers were allocate for a recovery in 2023 that the stock market will begin pricing in in 2022.
Still, the question is in the near future will investors sell the rallies instead of buy the dips. That is what they have been doing. Looming recession had/has been crushing both stocks and bonds.
On the consumer side, Procter & Gamble was up 8.7% on week, but that is after weeks of flopflipping mostly down. PG is said to be a good hedge against inflation.
Some of the hope that inflation will peak and recession will stay in abeyance or moderate is based on a down week for Energy Sector, as shown by XLE which was up on Friday but down -7.36 % on last five days. The sector was do for a pullback they say. Will it continue to crack? Or was it just a shakeout?
“The Market” is a strange bird of sentiment. Greed shades thinking. So does fear. Tho less so this week. Take on more risk but don't take on too much they say like Billie Holiday (G*d Bless the Child) - Baruch Bernard
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