A Comment -- General Comments From an Expert (A Commentary)

2022 vs. 2008: This 2008 analogy is bogus, with little in common with 2022. There have been many times when the Fed raised rates. It was tough at first, but markets survived. In 2008, the entire system collapsed and the consumer was vastly over-extended, not in 2022. Own stocks for the long haul rather than trade in and out.

Santa Claus rally Technical analyst Larry Williams is adamant that the Santa Claus rally will happen this year, despite the current gloom. His research says that if you bought on Dec. 22 or 23 and held for five trading days (using stop losses), you would turn a profit. His data points to the best buying opportunities in mid or late December. This rally tends to last to January 10. In 2021, we saw a rally from Dec. 20 through the end of the year. In 2022, Thursday, Dec. 22 is the sweet spot to buy. Further, Williams thinks we're close to a bottom. Data shows that inflation has peaked, then falls rapidly, and it peaks when the market bottoms. The marketing is bottoming. Look at inflation in 2008 for this pattern. Therefore, William thinks the market can turn around.

He uses three dynamics for analyzing investments: trend, a quantitative risk model, and a fundamental model. Trend is the all-important one. The quantitative risk model itself consists of trend, market breadth, sentiment, fundamentals, and breadth of momentum. A simple rule for investing is to watch what the Fed does with interest rates and says about earnings. When the Fed indicates stimulus, the market goes up and when it pulls back on stimulus the market goes down. Because the market indicated an alert in April, he went to 40% cash and has reduced that now to 30% cash. The market is still in high risk territory and the trend is still bad. Equities purchased are defensive in nature including staples.

The question was on precious metals. There are three ways to invest in precious metals : buy streaming companies, buy 'paper gold' i.e. the bullion itself, buy the companies that produce it. He owns both the commodities and stocks.You should own some gold. Producers are coming off lows so there is at least short term upside.

Believes that actions by US Fed are the main reason the market are been selling off (rising interest rates). Thinks that the markets were expecting slower interest rate increases. US Fed has no choice but to act hawkish with incorrect assessments of the markets in the past 5 years. Good news is the CPI prints not as high as the last few months. Supply chain crunch also smoothing out.

Trevor Rose’s Insights - Trevor’s most-liked answers from 5i Research. Investment Lesson: Trying to Time the Market is a Fool's Errand. There is a reason that trying to time market bottoms and tops are what most would call a ‘fool’s errand’, and this is mostly because market bottoms and tops are exclusively obvious in hindsight, but also because it goes against our basic human nature. When the markets are declining day after day, and there is seemingly no end in sight, our instincts are to assume that this trend will continue and fear that the markets will not recover for quite some time. On the contrary, when markets are rising day after day, it is easy to believe that this trend will continue and human emotions stoke a fear that selling at those levels would be ‘too early’. Calling the winter market top of 2021 is now obvious in hindsight – inflation was picking up and the Fed was preparing for higher rates and reduced liquidity, but yet most investors chose not to sell – why? We believe that it is because most investors believed that the markets would continue their climb higher, as was the case in the latter part of 2020 and throughout 2021. Investors’ fear of selling at that point and regretting selling too early was high.

He thinks the Fed wants to see lots of layoffs, but they're not getting that so the Fed is getting scared. Cramer expects big layoffs after Christmas, though. Layoffs will increase as the economy softens. The epicentre of layoffs will be Silicon Valley, especially enterprise software. Will layoffs be small and surgical or widespread?

The Fed. Every good central banker worth his salt remembers the Volcker playbook, and Powell's executing on it diligently to the chagrin of many asset classes around the world this year. Fed Chair Arthur Burns got dealt a difficult hand with the OPEC embargo, Arab-Israeli war, and other difficult economic conditions. Nevertheless, inflation got out of hand on his watch, and it took some bitter medicine by his successor, Volcker, to get that genie back in the bottle, where it's stayed for most of the last 40 years until quite recently.

Santa Claus rally? Hasn't shown up so far in December. We're down as far as the headline indices go, pretty significantly. Lots of volatility in both directions. Brief hurrah a couple of weeks ago when CPI numbers came in lower than expected, but that was short-lived. Hopers and dreamers who hoped Powell would pivot to a more dovish monetary stance were disappointed. Cold water thrown on those hopes yesterday. Today we have some more disappointing economic news with interest rate hikes on the other side of the Atlantic and negative month-over-month US retail sales for November. Economy is slowing. Inflation is yesterday's news. The risk more on the front burner as we position portfolios for 2023 is a reset of economic conditions and with it expectations for corporate profits that are too high and need a dose of reality.

2023 outlook. It's going to be a tale of two halves. Radically different set of market opportunities in the back half relative to the front half. It'll get better in the second half. He and his team have been working on the bull market game plan, a shopping list of names they want to add to portfolios when we get an inflection point of economic and market conditions.

Violent pace of interest rate increases. Doesn't think we've ever seen anything like this. Compounding that has been the previous guidance, which suggested rate hikes would be mild but have been absolutely very aggressive. It's been a shock to the markets and to investors.

Higher rates and debt. We hear that interest rate hikes are really painful for the consumer. Important not to forget that it's painful for everyone including governments, corporations, and households. US national debt is over 31T, a massive number. Higher rates are so punitive for all parts of society, but it's a short- to medium-term measure designed to tamp down the flames of inflation.

Signs of inflation levelling off? Yes. Challenging part is that the data is month over month. There was a point where inflation really jumped. Yesterday's headline CPI of 7% has come down from 9%. If hikes hold, and the price levels remain stable, you're likely to see monthly headline inflation continue to roll down to 3-4% in the back half of next year. As a consumer you don't really see it, as the prices for everything have jumped significantly. The Fed is trying to halt the price increases so that inflation naturally levels off. That looks to be the case.

Fed hiking approach. The expectation for today is around 50 bps. But he expects the language to be very aggressive. Forward guidance, vigilance, and an aggressive tone are also part of the tools in the toolbox.