Well, it was fun while it lasted. The politicians and decision-makers in government and at the Federal Reserve flooded the country with liquidity, especially while they panicked the nation with COVID-19, which turned the idle hands sitting at home into day traders. Now we are ready to hit the wall, caused by the mountains of money that were printed and either distributed or spent.<\/p>\n
Friday\u2019s 8.6% inflation reading was the highest since 1981, and gasoline prices surging past the $5 mark are at the highest level ever, with Brent and West Texas Intermediate crude both trading right near the $120 mark. The core inflation number at 6% also exceeded expectations, which means everyday items that consumers need are also hitting highs not seen in years.<\/p>\n
The Federal Reserve meeting for June starts tomorrow, and there is speculation that the once for-sure 50 basis-point increase could turn into a 75-basis-point increase. While that may not happen this week, as Fed Chair Jay Powell knows that will spook the markets into an even bigger decline than what we have seen over the past three days, it is almost a certainty they will have to go that route in July.<\/p>\n
Morgan Stanley made some very precise and scary observations on where we stand as the S&P 500 slips back into bear market status, which is defined as a 20% or more decline. These were made as of the close on Friday:<\/p>\n
The oddity is that last week marked the fifth consecutive week of inflows to U.S. equities, while inflows this year are at the $120 billion level. Even Cathie Wood’s hammered ARK Innovation flagship fund has seen massive inflows this year, despite being crushed to the tune of 75%.<\/p>\n \t\t\t\t