What follows is an excerpt from this weekend's 275th Edition of Zenolytics Turning Points.
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MARKET UPDATE
There are numerous reasons to believe that the markets are in the process of putting in a bottom around current levels that will be looked back on as significant come year end.
Following this past week's price action, Fed decision and cross asset correlations, the markets seem to be moving away from the inflation narrative, with an evolving realization that the economy has already stalled, being broken down on the side of the road, while the Fed keeps taking a baseball bat to its windshield.
While the Fed can be behind the curve for months on end, the markets are much wiser, seeing further down the road than anyone can imagine as real capital is at stake. The Fed, on the other hand, has numerous conflicting motivations, whether political or otherwise.
As we all know, the Fed raised by 75 basis points this past week, for the first time signaling that they are serious about tackling inflation. And this weekend, this newly conceived tough guy stance from the Fed was further confirmed by a Fed official who stated they will most likely raise by another 75 basis points in July.
Given how quickly the economy is deteriorating, the 75 basis points they do in July, if they indeed follow through, will be their last rate hike of the year. I expect the market to begin sensing that any day now.
In the meanwhile, we have complete and utter chaos taking place in nearly every risk related sector that is not associated with commodities.
Leading into and following this past week's Fed meeting, numerous historically relevant signals have taken place demonstrating the extreme nature of the selling that has taken place.
This is taking place just as we reach peak inflationary fears, with investors forgetting what is on the other side of the Fed destroying wealth, ballooning inventories and all but eliminating consumption.
Perhaps by design or perhaps by pure coincidence, we are reaching peak inflationary fears right as we are about to make our way into election season past July. The motivation to take care of the threat of inflation in as expeditiously a manner as possible has arrived.
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