Whither equity investments?

Still pretty high valuations after that correction. I think the market is taking a second look at these multiples through the prism of increasingly likely rate hikes. S&P 500 PE Ratio

And of course the Ukraine uncertainty stuff isn’t exactly great for markets either.


Wild ride today. When will the fed step in?

Stocks mount stunning comeback on Monday with Dow closing in the green after earlier 1,000-point loss

The Nasdaq Composite Index turned positive after being down as much as 4.9% earlier in the session.

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The FOMC meets today with announcements tomorrow afternoon. The equity market is watching closely.

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The baseline expectations at this point are 4x 0.25% rate hikes over the coming meetings (probably 1 each), and quantitative tightening / reducing the Fed balance sheet. I guess we’ll see what they say tomorrow.

Did I say 4 hikes? I meant 5 hikes.




This is only my opinion:

I don’t think four or five small (0.25%) interest rate increases in 2022 will be enough to derail equities. This is especially true because investors have been forewarned with little effect. The stock market, after all, moves in anticipation of trouble.

That said, I also don’t think four or five tiny interest rate increases will do much to control inflation. But this is not the inflation thread so enough said about that.

Finally, and back to equities, I do believe the Ukrainian turbulence could impact stocks should things get out of hand and escalate. While I do not foresee that happening, certainly it could.

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I wouldn’t rule it out. Biden seems to want to wag that dog really hard. Putin’s got a track record for engineering events to his advantage too so I’d be more surprised if nothing happened. And the sanctions coming along with the uncertainty would not be good for global markets any way you look at it.

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The following piece is shamelessly pilfered from the Financial Times:

Wall Street split on ‘buying the dip’ in whipsawing US stock market

Madison Darbyshire in New York

Wall Street is starkly divided over buying the dip as the US stock market is on track for its worst January since 2009.

Buying the dip, or adding shares during downturns, has proven a lucrative strategy since the start of the pandemic. Markets have rebounded higher and faster as monetary and fiscal policy kept borrowing rates near zero and flooded the economy with money.

But as the Federal Reserve moves to clamp down on high inflation, investors sharply disagree over how well markets will bounce back this time.

“The buy-the-dip reflex should be resisted in the environment we are likely to continue to face in 2022,” said Rob Sharps, the new chief executive of T Rowe Price, the fund manager which oversees $1.7tn in assets.

Bill Gross, the founder and former chief investment officer of $2.2tn fund manager Pimco, told the Financial Times: “The buy the dip mentality has been obliterated in the market.”

Markets have had a rough start to 2022 as highly-valued tech stocks and lossmaking but buzzy names are pulled back to earth. The tech-heavy Nasdaq Composite index is down nearly 13 per cent since the start of the year, while the S&P 500 index of US blue-chip stocks has dropped 7.6 per cent, even after a rally late on Friday.

Shares have moved violently as investors grapple with the path of US interest rates. The Federal Reserve this week signalled it would begin to raise rates in March, and Jay Powell, chair, left open the prospect of an aggressive sequence of rate rises during the year.

Wall Street analysts took notice: HSBC warned investors that there was little indication that Powell would step in to prop up a falling market, while Jefferies said that the more the Fed tightens, the more optimism in the markets will come into doubt.

“Any environment where there is a reversal of accommodating monetary policy makes it more difficult to expect that returns will be robust, and that it is necessarily the right thing to do to buy each pullback,” Sharps said in an interview with the FT.

Yet others are pouncing on pullbacks. The billionaire Bill Ackman, the head of the hedge fund Pershing Square, this week said his group bought more than 3.1m shares of Netflix after the video streaming company’s price had slumped.

“Many of our best investments have emerged when other investors whose time horizons are short term, discard great companies at prices that look extraordinarily attractive when one has a long-term horizon,” Ackman said in a letter released on Wednesday.

Jonathan Gray, president of Blackstone, said earlier this week that “the market trading off and the average Nasdaq stock being down over 40 per cent [from last year’s all-time high] could create opportunities” for the private equity and alternatives manager with $881bn in assets.

And Cathie Wood of Ark Invest, whose once high-flying flagship portfolio of tech stocks is down 27 per cent since the start of 2022, this week argued that “innovation is on sale” after asset prices dropped.

Analysts note that this month’s sell-offs have been not simply driven by concerns over interest rates but fundamentals, as companies trading at high valuation multiples begin to look more precarious.

Gross said that as Fed policy tightens, investors, especially new ones who have only experienced a bull market, will shy away from buying shares on the way down “in what we’re beginning to see as a bear market”.


Fed has said to expect an end to accommodation shortly (March, which means next week).

Fed has said its bond purchases will end shortly (March, which means next week).

Fed has not committed, insofar as I’m aware, to a selloff schedule for its bloated bond portfolio/balance sheet. So shortly no more purchases but no promises on sales, something which would mitigate in favor of higher interest rates generally, independent of new FOMC March Federal Funds rate increases.

And finally there is this interesting Barrons piece from yesterday:

JPMorgan Now Expects Nine Straight Fed Rate Increases Until March 2023

So if stocks are headed higher it’s gonna happen against some headwind. And this is to say nothing of Ukraine.

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It seems to me there are bears about. Efforts to isolate Putin must inevitably hit him where it hurts most: oil and natural gas. Those are key sources of Russia’s wealth.

And those commodities are available elsewhere, too. But at what cost, that is the issue.

Cut off nose to spite face

I understand Biden and NATO’s desire to punish Putin. I do not disagree. But costs for Americans of about everything could go up markedly. And Biden is not about to promote domestic energy production. That is not allowed by his far left supporters. So it seems to me a recession might lie not that far ahead and the market could take a hit. Stagflation also appears to be a possibility.


Yeah these sanctions may have a very bad impact on the global economy. As much as I’d love to see them turn Russia into the dump they deserve to be (sorry old grudges coming back), I don’t think they’ll be effective either.

I think Russia is well prepared to handle them for a while, at least until the political fallout removes the ones who put them in place. They had time to set themselves up for this by rearranging their debt, closing ranks with China, etc. They learned from 2014. Plus what did the sanctions that came after the 2014 invasion of Crimea accomplish? Deter Putin from working further to reboot USSR 2.0 by trying to expand back into old territories? Ooops.

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So far Biden has done nothing unanticipated by Putin. It’s a chess match and Putin is about ten moves ahead.

News is we rely on Russia for 7% of our oil. Should that be lost it will be enough to raise prices here a bit. The real problem, though, is Biden’s ongoing insistence that replacement oil will not come from North America.

Biden’s wacko green base does not mind when Americans pay through the nose for foreign energy. Just so long as nobody here is making a profit.


Back to OP this might be a good time to dip toe in the water and atleast get some div. income Anyone here guess/know which ones

Just sort of thinking out loud:

One wonders, with so many negative events happening elsewhere, might US equities not become rather a safe haven for investors world wide with a preference for equities? Should money begin pouring into our stock markets, this might be why.

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I don’t recall recent (20 years) trends, but in the 70’s through 90’s, disruptive events generally lead people to invest in the U.S. dollar and U.S. bonds. I do not recall equites being directly benefited by those disruptions. On the other hand, 30 - 50 years ago seems like a different planet. :upside_down_face:

I could see some re-investment away from Europe and towards more geographically distant (and hopefully stable) countries. But I’m not sure which of the US which is heavily involved by proxy in the outcome in Europe, or China (or even South Korea or Japan) would look like safer places to invest in and thus benefit from incoming reallocated funds.


Both Russians and Americans love to travel there.


Stocks up as equity investors this morning betting inflation has peaked.

That’s wishful thinking in my view. But who knows.

no, but the core CPI came in lower than expected for March, so I think that was the reason for the enthusiasm.

Someone posted a link to a WF report which concluded inflation peaked in March. I don’t believe them, but what do I know - I don’t even ride around in a stagecoach.

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