DE | Sinai Economic and Market Perspectives | Side-by-Side – 02/21/22

Posted February 25, 2022 by rvillareal

[private]

[/private]

Side-by-Side
Allen Sinai and Rohan Kumar

Correction! Inflation, Fed, Interest Rates and Russian Risks
Inflation, etc., Correction

“Hot” Economy, “Hot” Labor Market, “Hot” Inflation Spell
Positive Earnings and Equity Bull Market

Tighter Monetary Policy and Rising Interest Rates Spell
“Bear” Fixed Income Market—Negative Equities

Net—Side-by-Side Rising Interest Rates, Still An
Equity Bull Market, Periodic Corrections

Correction—Inflation, Fed and Interest Rates, Geopolitical Risks, Inflation, Fed and Interest Rates, Correction
Surprisingly high CPI price inflation for January (released Thurs., Feb. 10) triggered increased uncertainty over how much Federal Reserve Tightening, how soon, and how high short-term interest rates might go.
Rising interest rates have been the source of an ongoing stock market Correction, huge volatility and fundamental portfolio shifts since early January.
Higher interest rates suggest lower valuations for stocks; hence, while the uncertainty goes on, a stock market Correction goes on, perhaps as much as 10%-to-15% below the previous closing high in the S&P 500 of 4797. How long always is difficult to calibrate since Corrections typically reflect short-term risks that do not become long-run realities. A Correction can last anywhere from hours, a day-or-so, to weeks, and sometimes months. This one has been almost two months.

(Continued…)