To The Moon

Snapping days of losing streak, major US market indices finally turned deep green and filled in some of the deep crevices established since the Fed Chair Jay Powell’s hawkish speech at Jackson Hole 2 weeks ago.

In the Beige Book release by the Fed out yesterday, 2 weeks prior to its next FOMC meeting, the Fed shed more light on its economic outlook: a generally weak economy, led by higher prices and tight labor market, is countered somewhat by inflation showing signs of decelerating. The Fed expects demands to continue softening for the next 6-12 months, which put an informal timeline on how much longer Fed policy will need to be kept taut around the domestic economy.

Fed Vice President Lael Brainard in her speech yesterday also stressed that the FOMC remains committed to fighting inflation, which will take a few months before it will be clear the extent the FOMC needs to go. She was careful to state the Fed ought not over-tighten, in order to successfully staunch inflation but not dig US into recession.

Thus, 6-12 months from the Beige Book, and “a few months” from Brainard — we’re looking at continued hikes through the end of 2022.

The higher clarity appeared to sooth the market yesterday. I’ve been adding $Vanguard S&P 500 ETF(VOO)$ during the broad market’s losing streak, and look to accumulate more if the downturn resumes.

There’s a high chance that things will get worse before they improve, including dire prospects for European heating supplies over the winter months on the back of Russia’s latest strategy to have its sanctions lifted by the West over its war of aggression in Ukraine, which now roils toward its 7th month. And China has just undergone a fresh Covid shutdown, hampering supply chains to the West that have aggravated economic growth the world over.

Hence, we need to remain vigilant and perform our due diligence before putting our hard-earned money into the market.

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