The stock market rally that started in mid-June started to reverse by mid-August. Monday, the S&P 500 fell 2.1% by market close.
Gareth Soloway, Chief Market Strategist of InTheMoneyStocks.com, said that the volatility is not yet over, and in fact, stocks will likely see new lows.
“This is a fear of the Fed not backing off,” Soloway told David Lin, Anchor for Kitco News. “We got the minutes last week from the Federal Reserve meeting, that kind of was the end of the move. Right into those minutes are when we touched the 200-day moving average, which was the technical resistance level. And as soon as we heard from the Fed, it didn’t seem like they were as dovish as the market wanted.”
Soloway said that it is possible that stocks will not recover to their 2021 highs for many years.
“The stock market has made its highs in 2021. We will not take those highs out for five to ten years,” he said.
Worsening macroeconomic conditions are to blame, Soloway said.
“You’re going to have this Genie that’s out of the bottle named inflation, it’s not going to go back to 2% or under for a long, long time. That’s going to mean that the Federal Reserve is not going to be able to print us out of the future recessions that are going to come, especially this next one,” he said.
An economy “mired in stagflation” will last for years, Soloway noted, and weigh down on equities prices and earnings.
Investors and traders will have to be stock pickers going forward, he said.
“I think you’re going to want to stay away from the indexes themselves and you need to start looking and seeing what’s the new technology, what’s a stock that has a good dividend, for example,” he said.
Additionally, a strong U.S. dollar also contributed to a drop in stock markets, Soloway said, as a stronger dollar hurts export-oriented companies.
The DXY index rose 0.73% on Monday.
Soloway maintains his view that gold will be the best performing asset by the end of this year.
For Soloway’s views on Bitcoin, Ethereum, AMC, and Bed Bath & Beyond shares, watch the video above.
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Read More:Stock market freefall will continue, won’t make new highs for 10 years – Gareth Soloway on Bitcoin, AMC, gold
2022-08-22 22:36:00
