The two main concerns the market is now faced with in the near-term.
The economy continues to chug along more robust than most economists expected. Remember most of them earlier this year were calling for a recession by the second half of the year. That has not materialized. Yet, as we explore with you in the remainder of this Outlook, there are REAL concerns that two serious problems could derail the soft-landing rhetoric and throw the stock market into a prolonged correction. They are as follows:
1. A Growth Scare.
If the markets actually start to believe the Fed’s “higher-for-longer” rate hike threats (and they are starting to) then worries about a growth slowdown will begin to rise. We will show you some of the charts that are making us believe a slowdown could be upon us.
In the short term, fears of a looming government shutdown, the impact of worsening labor strikes, higher energy prices, and signs of economic weakness could all bring the “growth scare” to light sooner than expected. This will inevitably cause the stock market to endure a prolonged correction.
The second concern is a major bounce back in inflation. If the Fed suddenly signals it could hike rates more than once it would only be because they are receiving signs that inflation is about to spike and the trajectory of the CPI/PPI numbers rise. Yes, data these past few months have shown a cooling of inflation pressures, but with the recent rise in energy prices and food delivery problems around the world, it is quite conceivable that inflation could spike.
Let’s now explore some useful charts to show us where these concerns may be showing up: