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Bulls are still in charge!

Updated: Apr 6, 2023

“Resolute FED Leadership Required”

Strong Macro indicators point to higher than expected economic activity in 2022, so stocks should continue to perform well.

Below are a few bullish and bearish points to consider as the year comes to a close. Note, investors appear much more interested in the bullish side of things.

Bullish considerations

  • COVID-19 trends improve as new cases come down from recent highs.

  • Federal Reserve policy continues to support interest rates remaining unchanged while bond purchases taper off

  • The demand for goods and services remains robust

  • Healthy corporate profits with solid stock buyback activity continue

  • Continuation of investor impulses to “buy the dip” when stocks temporarily move lower.

Bearish considerations

  • Persistent inflation is present across much of the economy and within many industries, potentially slowing profits and economic growth.

  • Supply chain disruptions and ongoing labor difficulties may hamper economic growth.

  • Central bank policy impact: leaving policy too accommodating for too long or tightening too soon could trigger stock prices.

  • In Washington, a debt ceiling miscalculation or underestimation of the knock-on effects of higher taxes presses on stocks.

It’s important to note that today, Nobel Laureate Economist Paul Krugman said, “these are wavering times; although there are no signs of Stagnation currently, we should not forget the lessons of the 1970’s just yet”. The ’70s brought on an economic scare tactic with the introduction of the Misery Index. Krugman further recommends immediately tapering but not lowering interest rates just yet.

The data source for indexes and sector graphs: Morningstar Direct, Nov. 8, 2021.

Examples are for illustrative purposes only and are not guaranteed.

Past performance does not guarantee success.

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