If the market ever needed a savior in the last 15 months, the time is now.
But it won’t be the Federal Reserve.
They just ignored the massive financial crisis.
I’m in shock.
Fed Chair Jerome Powell even had the nerve to say the U.S. banking sector is strong.
We have banks collapsing every other day. The second largest bank collapse in history. But banks are strong.
I get that he can’t start a full blown panic about the weakness some of the largest banks are experiencing.
But, to raise interest rates as a show of confidence and talk it up is out right criminal.
Here’s what it means for the market and why I am still in shock…
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Whether you agree with the Fed or not, it’s irrelevant.
Because we all know why they raise interest rates to begin with – to kill the economy.
Higher interest rates tighten lending, which is what caused these banks to collapse to begin with. It spreads throughout the economy to slow the entire US down.
It’s intentional for various reasons, it just happens to be inflation this time around.
But with inflation settling and cracks turning into full blown breaks in the financial system, the time to ease was 2022.
Hiking interest rates in the face of disaster isn’t the way Jerome Powell will want to go down in history, likely leading to one of the greatest crashes in history, and the Fed takes all the blame.
They will blame crypto, or inflation, but this one, and the recent bank collapses, are all on the Fed.
Clearly, they are not done yet. If you think 2023 was set to reverse the course of 2022, you are dead wrong.
This market is going lower, and any estimate to the downside needs to be readjusted.
The bright green line is a short-term trend indicator. The S&P just fell back below it yesterday.
But this is all about the short-term swings, navigating the market from day to day.
By the end of the week, who knows what will happen.
By the end of the year, I can tell you we will be lower though.
And the bottom is not on this chart.
We could easily see the S&P 500 fall back to the pandemic lows. Not the peak before the pandemic, I’m talking about the panic lows we set three years ago – over 40% below where the market is currently trading.
That’s my target for an ultimate bottom.
And I think it is conservative.
Talk about a generational buying opportunity. When it happens, just thank the Fed.
Regards,
Chad Shoop, CMT
Editor, Bank It or Tank It ELITE