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Hey friends! Happy Monday. It's quite a bloody day so far. Perhaps a good time to discuss how the market may still have more pain ahead as we navigate through the year ahead.
1: Bear markets tend to stop only after the Fed cuts rates
Not only has the Fed avoided discussing cutting rates, they're still hiking and it seems likely that will continue throughout at least the first half of 2023 to a terminal rate as high as 5.25% based on Fed Funds Futures.
The only material change on the table from a monetary policy perspective is a slowdown in hikes to come. But with so much focus on rate hikes, we're not hearing nearly enough discussion about what is the grandest monetary policy tightening experiment of all time: quantitative tightening.