Some people are concerned about mounting inflationary risks. For example, it was only last week the Fed raised its inflation projections – where core inflation is expected to grow at a 2.8% annual pace, up 0.3 percentage points from the prior reading. And whilst inflation may remain sticky in areas like services and shelter (which I will talk to more shortly) – I think we should be more concerned with growth.
Fed Reserve
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The Slowdown is Here… Now What?
Feb 15th I asked this question: “Ready for a Growth Scare?” Markets were yet to correct at the time… however fast forward ~5 weeks and the growth scare has arrived. Now investors are taking notice. The Fed warned growth is likely to slow this week – where Chair Powell said economists outside of the central bank have generally moved up their estimated chance of a recession. The Fed downgraded its economic growth outlook while raising its inflation projection. They see the U.S. economy growing at a 1.7% pace this year, down 0.4 percentage points from what it forecast in December.
Worst Week of the Year… Uncertainty Weighs
Approx 2 months ago – it felt like markets were starting to hedge their bets. How could I tell? Whilst the market was trading near record highs (around 6100) – momentum was fading. I commented on both the weekly MACD and RSI falling – whilst prices remained high. Technicians call this “negative divergence”. Quite often it suggests prices are at greater risk of easing. Since then they’ve dropped ~6%. The week ending March 7th was the worst week for the year and the third straight week of losses… more to come? I think so…