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In terms of where we currently stand, a Guggenheim analyst suggests that stocks could be poised to decline 45-75% from their peak…much like the collapse of the internet bubble…all because of a delayed reaction from the federal reserve to keep raising rates until it’s clear that inflation has gone away.
This also coincides with a term known as the "Bullwhip Effect" – because, when businesses order inventory…they do so by forecasting demand, shipping costs, and prices. Although, when businesses order more…manufacturers order more…so, suppliers make EVEN more…eventually leading to a point where there’s a MASSIVE SURPLUS in excess of what the markets can handle.
That, in combination of slowing demand, and higher interest rates, is causing the market to fall at a pace that we haven’t seen since 2020 – and NOW – retailers are warning of STAGFLATION CONCERNS, where inflation persists, during a time where growth is low, and unemployment is rising.
According to CNBC, these are the 7 Categories that will need to turn in order for us to see a recovery:
Redfin says that in April, just 60.7% of home offers written by its agents faced competing offers, compared to 63.4% a month earlier and 67.4% a year ago.”
Second: The Automotive Industry
Used car prices have fallen 6.4% since January…and, as supply chains begin to normalize throughout the next year – values could begin to “reverse” – pun intended.
Earlier in the year, there was a concern of a “Wage Price Spiral,” where employees would have to earn more, to pay for the products that cost more, leading to employees that earn more…repeating the cycle over again. But, with widespread layoffs and declining wages…a spiral looks less and less likely to happen…
Fourth: International Turmoil.
For the time being, we’ve seen commodity prices like oil and grains skyrocket…leading to brand new record gas prices across several states. That, of course, increases the cost of shipping, travel, transportation, and everything else that makes up inflation readings, leading to a greater likelihood of more rate hikes.
Fifth – Higher Freight Costs, which lead to higher prices getting passed on to consumers. It's said that these costs will NEED to begin slowing down…if we’re to get inflation under control.
Sixth: Airfare fares are also increasing, leading to less travel, less spending, and the fears that this may contribute to an upcoming recession.
And FINALLY…SEVENTH…consumer spending will need to see a comeback, because – throughout 2022 – rising prices are deterring buyers, and leading to low..or, in some cases….NEGATIVE growth.
As far as my own thoughts about this, and how I’m investing…I’ve said it before, and I’ll say it again: the term “Riches Are Made In Recessions” is a perfect motto to live by.
The fact is, the best times to buy tend to be the times where EVERYONE thinks it’s a bad idea to buy, and things can get worse…if the market isn’t preparing for something to go wrong, be worried that MAYBE it’s higher than it should be, so don’t fear drops like this.
For business or one-on-one real estate investing/real estate agent consulting inquiries, you can reach me at GrahamStephanBusiness@gmail.com
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