Shares could be at a record high, but growing concern about rising interest rates, inflation and the next move by the Federal Reserve is keeping investors afloat.
Here’s what experts are looking at ahead of Wednesday’s Fed decision.
Jim Cramer, CNBC’s “Mad Money” host, says it’s still an investible market.
“The money is coming here. And I think when I hear that I know there will be people who will say, “Wait a second, this is a bad sign,” or they want to think about the other side of the trade. I listened to Scott Kirby this morning at United. I listened to these cruise line improvements and how I can increase fares and I come back and tell you, “You know what? It’s a good time to invest, I’m sorry! ” “
Karen Firestone, president and CEO of Aureus Asset Management, breaks down the market disconnect.
“The market, in general, has very expensive stock pockets and we saw what happened to the group – namely Peloton, Zoom, Airbnb, DoorDash, Palantir. Shares have fallen since the fall because companies have just moved forward, but they are selling at a large number of sales. So now we have the September reopening transaction. And, of course, airlines, hotels, casinos will have a big boom in business compared to what they had for the whole year Covid. This does not mean, however, that stocks continue to rise forever. You hear so many people talking about their enthusiasm for cyclical or value trading, but most sectors of the market trade about 23 or 24 times before. Now, if you look at the industries that were very depressed last year, they are 24 or earnings. So, Cat[erpillar] and Deere are selling at the same multiple as Facebook and Google, and tech stocks are selling 25 times their earnings next year, and obviously have some expensive names there. So, you know, you can take a break from the cyclical cycles, which we actually saw with technology. Technology stocks peaked in early September and somehow entered this break and are still declining, big names have fallen from where they were in the fourth quarter. They had a tough quarter in the fourth. They’ve had a very tough year so far. They increased by about 2%, and cyclical stocks increase from 8% to 20%. “
Judy Shelton, author and economist, shares what the Fed can and cannot do to control inflation.
“The reason why people are now afraid of inflation is that they see very rationally that an extraordinary amount of liquidity has been injected into the system. And we all found out that too much money chasing too little goods can cause inflation. The problem of thinking that it is a compromise of the Phillips Curve believes that, if we exceed inflation, we have the necessary tools to combat this. Well, the tools to fight are to raise interest rates paid for reserves or to continue to buy more, to interact more in the credit markets, and so I don’t think the Fed will start selling back soon. I worry if it indicates that I can increase the rate of excess reserves, which are already at a record $ 3.6 trillion, that it promotes this tendency of banks to be more interested in interacting with the Federal Reserve than private lending. And the way you get productive growth, the kind that actually increases the production of goods and services, is to encourage small businesses, there are jobs. So I’m worried that the Fed is in a position that’s a little hard to sustain, in the sense that it’s expressing a new tolerance for inflation, somehow helping lower-wage workers, when in fact they’re the most hurt by inflation. . And I think it discourages private lending, which would mean that banks would give up accumulating reserves to the Fed and lend them to the real economy, then you would get real growth, the kind that raises wages without causing inflation. “
Thomas Farley, president and CEO of Far Peak, warns of unrealistic assessments and projections.
“The thing that worries me is that I see investors hurt. And there have been a few offers that I look at and I just say that this valuation is not completely related to the financial reality … the projections per year of a business before income and the market somehow evaluate it in 2024-2025 income that can materialize or not . And my concern is that people will buy that enthusiasm and eventually get hurt if stocks run out. , this is my only concern about SPACS is that exact type of situation, really only selling a stock on hope and faith. I would like to see sponsors who feel a little more connected to these screenings, to keep their stocks for those screenings. “
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