The FED missed the inflationary situation calling it for a long time a transient phenomenon. It was a structural one. The war in Ukraine exacerbated the supply shocks in agricultural products and energy.
With its very delayed reaction, the FED is attempting to use Demand policies to solve mainly supply shock problems . The continuous abrupt interest rate increases, after the uncertain, long and variable time lags (that can last even two years) might eventually lead to a severe slow down of the economy. The same applies for major countries around the globe.
How can the bear market end ?
A) with inflation statistics showing continuous improvements. Not yet observed !
B) With a pivot in FED statements implying that rate increases will end around the level of 4.75 pct for the fed funds rate.
C) An earnings season for Q3 that will not disappoint.
D) A resolution in the geopolitical main conflict in Ukraine.
E) A resolution in the United Kingdom’s budget issues that are transmitted around the globe.
F) Technical factors from oversold conditions.
The markets are very weak especially in the NASDAQ that is more strongly affected by rising
interest rates. However, they can suddenly turnaround for strong recoveries. Or, drop even more !
In the short run anything can happen !
If somebody sells he/she has to be right twice :
in selling before another drop and in buying before the recovery !
Good luck to all of us !