May 12, 2022, 2:31 pm EDT
Unusual Times, Unusual Actions
Unusual times will bring unusual actions. This is how the stock markets reacted to 40-year high inflation data both from consumer-level (CPI: 8.3%) and wholesale level (PPI: 11%). Although both numbers were a little lower than the previous months, these levels are still way too high for most people to swallow.
Not only did individuals suffer from inflation, but businesses were also hit hard by rising material costs and shrinking profits. Fed Chairman Jerome Powell presented slow and mild actions and also made the case that the pain will last much longer than expected.
It means that the stock markets are far from the bottom after falling for 6 weeks straight. Yes. it is unusual to see such a long decline without a meaningful rebound or support. But, the unusual times were built by the years of balance sheet expansion, near-zero interest rates, and generous spending/borrowing plans, the unusual actions from the stock markets do come as expected.
We think strong support or rebound level is far from reach. It could be around 166 level for the Nasdaq-100 index (QQQ).
The stock market will keep going down for a long distance which surprises most people. Therefore, keep watching the falling of the stock markets until then.
