John Zechner's Top Picks: February 7, 2022
BNN Bloomberg
Top picks from John Zechner, chairman and founder, J. Zechner Associates
MARKET OUTLOOK:
If the ‘January effect’ truly exists and those returns are prelude for the rest of the year, then investors had better put on their crash helmets and strap on their seat belts for the ride in 2022!
Stocks swooned in the first month of the year, mirroring a similar sell-off that started in 2016, coincidentally also a time when the U.S. Federal Reserve started to remove the extreme monetary ease that had existed since the financial crisis in 2008.
But this time around, the ‘pivot’ to tighter policies appears more aggressive as the Federal Reserve prepares to drain liquidity from the financial system to cool the inflation that its policies partially stoked.
Almost every asset class outside of energy has hit a rough patch in 2022, from stocks to bonds to crypto. The reality that seems to be setting in for investors is that the so called ‘Fed put,’ which has rescued market sell-offs with new rounds of monetary easing on every sell-off might be Ka’put’!
That narrative has changed and getting inflation under control is the more urgent requirement. While a 20-25 per cent drop in the S&P 500 might lighten the Fed’s resolve to raise interest rates, don’t expect them to come to the rescue of stocks for a 10-15 per cent correction!
