Shares may be at record highs, but growing concern about rising interest rates, inflation and the Federal Reserve’s next move is keeping investors nervous.
Here’s what experts are looking at before the Fed’s decision on Wednesday.
Jim Cramer, host of CNBC’s “Mad Money” program, says it is still an investable market.
“The money is coming here. And I just think that when I hear that, I know people are going to say, ‘Wait a second, this is a bad sign’ or they want to think the other side of the deal. But I heard Scott Kirby this morning from United. I heard these updates from cruise lines and how they are able to raise rates, and I come back and say, ‘You know what, this is a good time to invest, sorry!’ “
Karen Firestone, president and CEO of Aureus Asset Management, eliminates the disconnect from the market.
“The market in general has very expensive stock pockets and we saw what happened to the group – Peloton, Zoom, Airbnb, DoorDash, Palantir. These stocks have fallen since the fall because they just outperformed, great but selling at high multiples of sales So now we’ve reopened the business since September. And, of course, airlines, hotels and casinos will have a big business boom compared to what they’ve had throughout Covid’s year. That doesn’t mean, however, that the shares keep going up forever. You hear so many people talking about their enthusiasm for cyclical or value trading, but most market sectors are trading around 23 or 24 times ahead of earnings. Now, if you look at the industrialists, that were very depressed last year, they are 24 times the earnings.[erpillar] and Deere sell on the same multiple as Facebook and Google, and the technology stocks are selling at 25 times next year’s profit, and they obviously have some expensive names there. So, you know, you can take a short break from cyclicals, which we, in fact, have seen with technology. Technology stocks peaked in early September, and they kind of entered that lull and are still low, the big names are below where they were in the fourth quarter. They had a difficult room in the room. They have had a very difficult year so far. They were up about 2% and cyclical stocks were up 8% to 20%. “
Judy Shelton, author and economist, shares what the Fed can and cannot do to control inflation.
“The reason people fear inflation now is that they see, in a very rational way, that there has been a huge amount of liquidity injected into the system. And we all learned that too much money chasing too few goods can cause inflation. The problem of thinking which is a compensation of the Phillips Curve is to believe that if we stay ahead of inflation, we will have the tools to fight it. Well, the tools to fight it are to increase the interest rates paid on the reserves or to continue buying even more, to interact more in the credit markets and therefore I don’t think the Fed is going to start selling anytime soon. I’m concerned if they imply that they could raise the rate on excess reserves, which are already at a record high of $ 3 , 6 trillion, that they are promoting this tendency for banks to be more interested in interacting with the Federal Reserve than in private lending. And the way to achieve productive economic growth, the type q What really increases the production of goods and services, is to encourage small businesses, this is where jobs are. So I am concerned that the Fed is in a somewhat unsustainable position, as it thinks that, by expressing a new tolerance for inflation, it is in some way helping lower-paid workers, when in fact they are the most affected by inflation. And I think they are discouraging private lending, which would be to stop banks from accumulating reserves in the Fed and lending them to the real economy, so you would have real growth, the kind that raises wages without causing inflation. “
Thomas Farley, president and CEO of Far Peak, warns of unrealistic assessments and projections.
“What worries me is seeing investors get hurt. And there are some deals that I see and I just say that this assessment is completely free from the financial reality … SPACS post-business, where they are launching five- annual projections of a pre-owned company -recipe and the market is somehow evaluating the 2024-2025 revenue that may or may not materialize. And my concern is that people will buy that enthusiasm and end up getting hurt if stocks fall., that is my only concern with SPACS is that exact type of situation, in fact, just selling a stock based on hope and faith. I would like to see the sponsors feel a little more tied to these projections, holding their shares to those projections. “
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