My opinion is the world is experiencing and seeing the symptoms of excessive stimulus, extended easy monetary policy, COVID lock-down supply issues, and the effects of manufacturing globalization through the process of a virus/pandemic event. Almost like a perfect storm, the global markets before COVID in February 2020 were uniquely positioned to be highly dependent on China/Asia for certain medical, chip, and other manufacturing components while shipping and supply trends collapsed. For the first 4 to 6+ months, the US worked through existing inventory/supplies. But after those supplies were exhausted, the US economy became dependent on new shipments to replenish inventory and to supply much-needed manufacturing components. This perpetual supply-side shortage has continued to prompt higher inflationary trends worldwide.
Slowly changing direction
I expect the US Federal Reserve to very clearly telegraph next year’s expectations with an evident intent to move away from extended stimulus and support programs slowly. A very slow rate increase, possibly moving rates above 0.50% before August 2022, could be in the works. The US Federal Reserve will want to adjust rates and policy to assist the global economy in efficiently transitioning through the current inflationary, deleveraging, and deflating the excessive price trends – not breaking the markets.
Expect the US Federal Reserve to announce very clear longer-term “intentions” and to telegraph their expectations related to inflation and supply issues. Here are my expectations in a nutshell:
- Potentially cut the bond-buying rates by another 15% to 45% in early 2022 (Q1:2022 through Q3:2022).
- Announce intentions to raise rates very slowly in late Q1:2022 or late Q2:2022 (possibly raising in tiny increments over many months).
- Announce the US Fed is watching the global markets and credit markets quite intently – attempting to identify subtle shifts in trends and activity while adjusting future actions/expectations.
The US Federal Reserve has room to raise rates 0.50% or a bit higher. It also has many other tactics to tighten (bond-buying, liquidity features, financial stress-based requirements). I believe the Fed will make very clear “baby steps” known – but not take any immediate actions.
Want to learn more about how I will navigate through what’s to come?
Learn how I use specific tools to help me understand price cycles, set-ups, and price target levels. Over the next 12 to 24+ months, I expect very large price swings in the US stock market and other asset classes across the globe. I believe the markets are starting to transition away from the continued central bank support rally phase and may start a revaluation phase as global traders attempt to identify the next big trends. Precious Metals will likely start to act as a proper hedge as caution and concern start to drive traders/investors into Metals.
In fact, I recently talked about how, if I could trade only one strategy for income, growth, and retirement, this is the one I would choose – The Technical Index & Bond Trader.
If you need technically proven trading and investing strategies using ETFs to profit during market rallies and to avoid/profit from market declines, be sure to join me at TEP – Total ETF Portfolio.
Have a great day!
