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The First Quarter 2022 - No Calm Waters In Sight

It has been quite a rollercoaster ride so far this year. January was the worst month since 2008 and February is off to a slow start.


Not only is the Fed most likely going to start raising rates in March, but we have the Russia-Ukraine tensions. However most of us are left not knowing just how hawkish Powell will be.

Goldman Sach's now predicts the Fed will lift its near zero benchmark by 25 basis points five times this year rather than on four occasions. That would take the benchmark to 1.25%-1.5% by the end of the year.

 

The Big Question: When will the rate hikes be priced in?


As you know, the stock market is future thinking and leaning. Movements get priced in long before they actually happen. If investors predict the Fed will raise the rates 1.25-1.5% by the end of this year, I think that this entire move is pricing in right now, and I wouldn't be surprised once the rate goes up in March by 0.25% the stocks start going up more.


However, if Powell takes an even more hawkish stance than investors thought, more of the move might start pricing in in March. What about the charts?


The QQQ (Nasdaq) ETF tested the 180MA (yellow) last week and rejected it. There is also a 1.7B volume shelf that it seems to not want to get pass. Those are going to be the key indicators that show us when the Street is ready to start buying and pushing tech up.


SPY (S&P500) on the other hand has blown through the 180MA, almost reaching the 50, and retested the 180MA as support. SPY has a $3B volume shelf that it held as support during this re-pricing event.


DIA (Dow Jones) is similar to SPY as it is testing the major Ma's as support right now. This will be key to hold this week and is what I'll be watching closely.


So what does it mean? I think for the most part this re-pricing event has taken place based on current expectations of rate hikes. This could be the best buying opportunity of the year, and I would recommend buying more of your long term, highest conviction plays.


Don't forget that Amazon, Tesla, Spotify, AMD, Alphabet and Snapchat all had amazing earnings recently. In my opinion this is an indication that most big tech will be fine even with a small rate hike. And yes, I believe that even a 1.5% rate hike is small since it we will still have some of the cheapest rates of all time.


Take Away


  1. Stocks don't always go up, contrary to popular opinion, and we should have a cash position on the sidelines to go in and buy value during these times.

  2. Diversify your portfolio between cyclicals and growth. Growth can seem attractive at points, but in times like these they are the most volatile and cyclicals catch up every time.

  3. Don't go to heavy on options. Even though options are fun and addictive, especially short term lottos, they get slaughtered for the most part in times like these where we reprice huge names, or trade sideways for who knows how long.

  4. Sit back and enjoy dips like this. They are huge learnings opportunities. Reflect on what you did wrong and what you can improve for the next dip. There will be a next dip.

  5. And don't forget Crypto. BTC is up 25% and CRO is up 45% in the last 2 weeks.

 

How to support me this new year?


For all of you that don't know, I have started a managed crypto fund for my closet followers and supporters. So far the fund is up an average of 12% since the beginning of this year. If you want to join us in the PSA Inner Circle, please email or message me and I will help you get in on the action.






 

Disclaimer: The comments opinions and analysis expressed herein are for informational and educational purpose only and should not be considered as individual advice or recommendations. Prostockadvice.com is not responsible or liable in any way for opinions expressed here. This is not meant to be financial advice as we are not a licensed financial advisor.

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