They say you can’t time the market.
But this might help you avoid getting sunk by it.
This interesting pattern can help you understand why we’re only at the beginning of this downward trend: HOPE.
Housing. Houses are expensive. Most people can’t buy a home outright, so they take out debt. Housing is the first area to decline when the market begins to turn because it is particularly sensitive to high-interest rates.
Orders. Orders refers to the net new orders placed for equipment and services. As interest rates increase, companies decrease the number of things they buy.
Profits are next. Fewer orders mean lower revenue and profits. When earnings start to drop, there’s only one thing left to fall.
E is for Employment. Believe it or not, companies don’t want to fire people. It’s very expensive. But when Profits collapse, there isn’t much else they can do.
Then — and only then — have we hit the bottom.
The final, critical information to know is that central bank rate increases take about 18 months to impact the market.
That gives us six months before the shit hits the fan in Q2 Earnings Season 2023.
You heard it here first.