If The Fed does its expected “shock and awe” (or shock and awful), it will be more than the stock markets will crash. The housing market could crash too.
Take the current US housing situation with its limited inventory of listings combined with massive Fed stimulypto.
US 1-unit housing starts are down -4.1% in January. But heck, it is January! But on a year-over-year basis, 1-unit housing starts are down -2.4%. But what will happen if The Fed ACTUALLY withdraws its gargantuan monetary stimulus (green line)?
Existing home sales inventory continues to decline as Bankrate’s 30-year mortgage rate starts to climb with expectations of Fed “Shock and Awful.”
Say hello to The Federal Reserve Board of Governors!
The stock market has never started a year falling as quickly as it is now.
The S&P 500 has dropped 11% — heading into correction territory — in the first 16 trading days of 2022 in its worst-ever start to a year, according to Bloomberg data that goes back over nine decades.
The downturn comes as traders brace for the Federal Reserve to tighten monetary policy and a surge in U.S. Treasury yields weighs on the outlook for stocks. A host of technical signals also suggest that more volatility may be coming up ahead.
“The Fed pulled the punchbowl, liquidity has evaporated, and the S&P and NDX broke below their 200dma for the first time since the Covid outbreak,” said Rich Ross, technical strategist at Evercore ISI.
A bear market down to the 3,800 level is likely for the S&P 500, Ross said, given “the dramatic erosion of the technical backdrop, in conjunction with the highest inflation, tightest policy, and most uncertain political and geopolitical condition in years” — not to mention its historic rally since 2020.
The Shiller CAPE ratio is extremely high …. not surprising how much air The Fed pumped into the market tires.