Our models continue to corroborate an end to this correction no later than August. The Fed will likely reduce the severity of its quantitative tightening, as the economy has shown itself to lack the strength to sustain many more rate hikes or Fed balance sheet reduction. Another likely catalyst for an end to this correction and rally into 2023 is the Bullwhip Effect, which portends a deflationary shock to the economy as a result of drastically reduced consumer spending. Fear of inflation and recession has grown so rampant that consumers are now spending the least they have in years. The result will be a swift and steep drop in prices as producers, faced with large inventories of items that will not sell, lower prices across the board. Consumers will then be poised to exercise their capital conserved from the uncertainty of these past few months and reignite the economy’s roaring engine into the end of this year. By the end of 2022, stocks and the major indexes have real potential to reach or even exceed their all-time highs.
Last Week’s Economic Data:
Core CPI: Miss
CPI: Miss
Initial Jobless Claims: Miss
PPI: Miss
Upcoming Economic Data:
Tuesday: Building Permits
Wednesday: Existing Home Sales
Thursday: Philadelphia Fed Manufacturing Index, Initial Jobless Claims
