Recalibrating matters - is what's dominating many scenes today. President Biden calls on the Fed to recalibrate policies relative to inflation; but then calls on an economic environment fostering growth; fixing the supply-chains; and of course more jobs. He may have tipped a bit too much to Putin about Ukraine; as I'll discuss in the main video tonight. Mostly he spoke to fighting inflation as well as the need to reward innovation; a strange (hopefully not toxic) brew.
Workers will emerge once the endemic phase arrives; shelves will be stocked and prices will ebb naturally in a number of areas; but not retreat to artificially low prices that prevailed previously (wage increases alone will prevent that). I don't disagree that improving transportation and infrastructure will help; but of course that's something to reference in 2-3 years or longer; since little of that is felt quickly. Things like drug prices could be helped more immediately; and of course that isn't felt comparably by people with decent health insurance.
Today was a technical failure to rebound; tomorrow will try again; but if not we will simply proceed in a developing downward channel. Ideally we'll bounce.
Lethargy dominates the market; while the U.K. news about ending mandates or restrictions, shows the clear way for recovery and Central Bank hikes too; or at least that's how it seems on the surface. As I noted in a pre-close video it's not that simple, because of China (elongated supply-chain issues as they will not emerge as quickly, presuming there is an emergence from Covid now, which seems awfully controversial between case levels and politics (?).
Either way the Fed doesn't have to move quickly if financial conditions tighten on their own a bit; which has been happening just a bit. There is a disastrous history of hikes at the wrong time; and there is risk of 'error' accordingly. This is a correction; it's a process and it's got more to go in an overall manner.
Meanwhile . . pundits are making too much about new supply-chain issues alleged regarding Ford. Yes Ford had a solid drop today on that perceived situation; and don’t be surprised if Ford clarifies (or even denies) the alleged situation. If true then so be it; as the stock is welcomed to consolidate well above our target goal of 18-20 on the buy at 12 (first identified as attractive since 9). I think hold and later this year think in terms of ~30 as a possibility. Yes Ford themselves released softer estimates; but a couple analysts chasing it recently reversed themselves; and that contributed to pressure.
In his News Conference President Biden mentioned 'Covid pills'. He spoke to keeping schools open, while still (pushing) advocating for vaccines without a reference to a broader-spectrum vaccine coming in March or so. He says that Covid is not going to go away; but things will get better. He didn't reference at all the moves by PM Johnson to cancel all restrictions in the United Kingdom effectively immediately. He did mention the 'dual mandate' of the Fed though.
(Comments on these charts from last night continue to prevail; downtrend).
Bottom line: it's a process as noted. The liquidation is at the 'fund'; also in the ETF's, as those levels of participants seem to be fueling the proportional, or fairly broad, downside participation in the big-caps and already-soft smaller.
Some banks don't have loan-loss reserves at comforting levels either; so that is another factor in the realization of the long-awaited 'catch-down' by Senior Indexes with the broader market, which remains in-decline for nearly a year.
It may be early in the downside process for the S&P; but not so early for those already creamed last year. We were prematurely optimistic on a handful; they tended to be broken SPAC's that we expected to drop and when half-price or a bit lower we showed interest. Clearly most went to lower lows along with the broader market or the S&P and NDX, which are not yet late in decline stage.
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