The basis of trading in the stock market is…trading. Buy cheap sell expensive. It doesn’t always work. The market has its own desires. Besides, not everyone is a trader. There are also long-term investors and for them it is less important to try to schedule points over time, especially since it is almost impossible. There are those who are successful, or who are more accurate, but it is already a gamble. Therefore, if you invest for the long term, fluctuations up and down should probably not interest you. If you are traders or active investors who change positions regularly to generate excess returns, then pay attention to what happened since the beginning of the year – a rally. The January effect incarnate.
The basis for the increases is apparently an assessment that the Federal Reserve will soon suspend interest rate increases. But, according to Mike Wilson, the chief strategist of Morgan Stanley, this is actually an opportunity to sell the shares.
Wilson describes the rally in the last month in particular and in the last few months in general with the S&P jumping 13% from the lows of about four months ago. Since then, the rate of inflation has fallen, fueling hopes that the Fed will be able to hold off on raising interest rates after its expected quarter-point increase this week. But isn’t the market immediately optimistic? Is it too early to celebrate the halt in interest rate hikes?
“A good atmosphere in the stock market made many investors feel that they were missing something, which forced them to increase their position in the stock market,” says Wilson, “The problem is that the Fed on Wednesday may deliver news that the market does not want to hear. The Fed has a great incentive to broadcast and give a forecast for longer-than-expected interest rate hikes.”
Wilson talks about the drop in interest rates in the bond market and in the loan market. When the interest rate drops, then the public returns to take out loans and has less difficulty consuming. This is the opposite of what the Fed wants. The Fed wants a decrease in consumption, wants a slowdown, wants a decrease in inflation. How can you fight inflation when the public does not reduce consumption , when the demands are great and add to that the unemployment that does not rise.
The Fed’s goal of returning inflation to the 2% range is a long way and he has already explicitly said that he will not rest until that happens. For now it’s a long way off and that means the Fed will want to ensure that interest rates don’t fall too quickly and rekindle demand. “Investors seem to have forgotten the cardinal rule of ‘don’t fight the Fed,'” adds Wilson. “The good news is now priced in stock prices, and the reality may be more difficult. The Fed wants to tame inflation and it will do so through interest rates.”
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