Opening Statement from the January 2022 Intelligent Investor (part 1)

Opening Statement from the January 2022 Intelligent Investor (part 1)

Originally published on January 5, 2022

Current Market Activity

On Wednesday, January 5, 2022 the Dow Jones continued with the New Year rally while the S&P 500 and Nasdaq continued to selloff. This all made sense given our previous discussions regarding rising inflation, the expectation of rising interest rates and the impact on valuations.

But if we examine the Fed Watch chart from January 2, 2022 we see that interest rate probabilities (which are determined by Fed funds futures contracts) pointed to a low chance of even one 25bp hike by February 2023. When we saw these data we thought it was quite strange.

By January 5 after the Fed discussed possibly of raising interest rates not long after the taper is scheduled to finished in March, you can see things changes dramatically (second chart). This is when the stock market entered into a strong selloff late in the day.  We will go into more detail in the January market forecasting research...