Now, things are getting interesting. There is a new SP500 52-week low.
I’ve spent most of the first part of this year making the argument that the 2021 stock market run, especially the October 21 to January 22 was overdone and that the corresponding downturn in the markets from around February 2022 to April 2022 could be considered more of a return to “normal” than any sort of market correction. Reasonable minds may differ.
Market Downturn Gets Real
Today, the S&P 500 took out its 52-week low. From here on out, everything down, is truly down. Our one big sideways stock market ends here, and we really are heading for a potential correction here. This is why people calling for the Fed to raise interest rates so fast are dead wrong. The signs of the economy slowing, but not declining, are everywhere. That is exactly where you want to be. That is what a soft landing is. An economy gliding back to normal growth, normal employment, and normal interest rates all without triggering layoffs, housing crashes, and so on.
All the Fed needs here is a little tap on the brakes. If it were me, I would skip a rate increase at the next meeting. Let the 1.0% increase we already have do its work along with unwinding the Fed’s balance sheet should do more than slow the economy down enough for this summer. Jumping ahead to further increases will curb inflation, but at risk of crashing the economy into yet another recession and forcing the Fed to once again cut rates to zero.