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📖 How The Old Buy-The-Dip Playbook Is Dated And Dangerous Thumbnail

📖 How The Old Buy-The-Dip Playbook Is Dated And Dangerous

Recent market rallies and pullbacks have been driven by alternating hopes and fears around the Fed taking its foot off the brake pedal - so far, to no avail. Over the last few decades, many investors have been conditioned that "buying the dip" pays and that impulse is still there (old habits die hard), causing large counter-trend rallies. However, this playbook is proving to be dated and dangerous in this new regime of high macroeconomic uncertainty, financial market volatility, inflation, and interest rates.

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🪨 How Q3 GDP Keeps The Fed Stuck Between A Rock And A Hard Place Thumbnail

🪨 How Q3 GDP Keeps The Fed Stuck Between A Rock And A Hard Place

Major stock market indices have rebounded in October as investors hope for a slowdown in the pace of Fed rate hikes. As of Friday, October 28, the S&P 500 had gained 8.8% over the month, and its year-to-date loss was cut to 18%, just slightly better than bear market levels. The Dow is now above correction territory with a 9.6% year-to-date decline, while the Nasdaq, consisting of hard-hit tech stocks, gained 5% in October to reach a year-to-date pullback of 29%. This occurred despite a jump in interest rates, with the 10-year U.S. Treasury yield rising above 4%. What's driving market optimism, and how should long-term investors maintain perspective?

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🌬️ How Recession Risk Is Rising Through Headwinds To Corporate Earnings Thumbnail

🌬️ How Recession Risk Is Rising Through Headwinds To Corporate Earnings

It's no secret that this year has been characterized by market and economic uncertainty due to inflation, monetary policy, and geopolitics. Prolonged market unease can be attributed to the fact that these economic effects take time to evolve. Inflation is not an overnight event but the result of supply and demand factors since 2020, compounded by monetary and fiscal policies. As mentioned last week, the effects of tightening monetary policy by the Fed are realized on a significant lag. The spike in energy and commodity prices due to the war in Ukraine will not be resolved quickly. Political events in China, the U.K., and the upcoming U.S. midterm election only add to this uncertainty. These facts underscore the need for investors to focus on the long run and resist the urge to react to every market movement, whether positive or negative.

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◀️ Rising Inflation And Interest Rates Are Creating A Reverse Wealth Effect Thumbnail

◀️ Rising Inflation And Interest Rates Are Creating A Reverse Wealth Effect

The latest inflation numbers confirm that the prices of everyday goods and services are still rising despite Fed rate hikes and a slowing economy. Major stock market indices continue to be in or near bear market levels, with the S&P 500 down 25% year-to-date, while interest rates jumped further last week, with the 10-year Treasury yield rising above 4%. Whether the Fed can regain control of inflation while keeping the economy steady remains the central question for investors and economists. Since inflation data is only released monthly, GDP data quarterly, and the Fed only meets once every six weeks, it could be some time before this question is fully answered.

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