“We must free ourselves of the hope that the sea will ever rest.  We must learn to sail in high winds.” – Aristotle Onassis


 Last week was another bad week for the equity markets with the Dow down -1.65%, the S&P 500 down -2.05%, and the Nasdaq down -2.70%. The equity markets are down again today (Monday).

The equity markets have been terrible all year. Almost all of this has been caused by the Fed due to their unrelenting battle to bring down inflation and it appears that they are not stopping. Practically every word out of their mouths have been to suggest higher and higher interest rates to be coming soon which will crush any equity portfolio in the way. They are definitely not fooling around this time. Add to that, they plan to keep raising interest rates  until inflation comes down to their 2% target.

I don’t expect this to stop until the Fed sends some more benign signals. In my opinion they should say that they will stop at 4% to 5% and  just let things cool down. While the inflation number is now down to approximately 7.00%, we are nowhere near to their 2.00% target. The collateral damage that they have caused in both the equity and bond markets seems to have no space in their thinking. This is a huge mistake and one that is hitting people and businesses alike.

They are also causing a huge increase in the cost of money as our borrowing rates seem to go up each week. This will hit corporate revenues and profits which will lower stock values. It will also hit individual pocket books as everything from mortgages to credit card rates have all risen dramatically this year.

One part of the market is starting to make a turn. It has not been noticed by many, but it is there, and it is the bond market. We are looking at U.S. Treasuries and high grade corporate bonds. The signal is getting stronger so we shall see fairly soon.


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These are Larry Lof’s opinions and not necessarily those of Cambridge, are for informational purposes only and should not be construed or acted upon as individualized investment advice. Past performance is not indicative of future results. Due to our compliance review process, delayed dissemination of this commentary occurs.

The S&P 500 index of stocks compiled by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. The Index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Indices mentioned are unmanaged and cannot be invested into directly.

Technical analysis represents an observation of past performance and trend, and past performance and trend are no guarantee of future performance, price, or trend. The price movements within capital markets cannot be guaranteed and always remain uncertain. The allocation discussed herein is not designed based on the individual needs of any one specific client or investor. In other words, it is not a customized strategy designed on the specific financial circumstances of the client. Please consult an advisor to discuss your individual situation before making any investments decision. Investing in securities involves risk of loss. Further, depending on the different types of investments, there may be varying degrees of risk including loss of original principal.

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