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Investors Are Headed for a “Summer of Pain”

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Many investors are left wondering if there’s more downside ahead as the S&P 500 teeters on its brim. One Wall Street giant, however, is certain that we’re headed for a “summer of pain.”

In an interview with MarketWatch, Mr. Minerd predicted that the S&P 500 could plummet 45% from its January peak this summer and says Nasdaq stocks may drop 75%. The chief investment officer at Guggenheim Partners argues these declines will happen as technology companies are repriced for the new Fed policy after November 2021.

Investors are on alert for Another Internet Bubble, according to some experts. The similarities between today’s tech stock market and the collapse of 1999 are striking enough that it might just happen all over again.

Minerd thinks that investors are finally realizing there is no such thing as the Federal Reserve’s “put,” which was supposed to help stocks in case of economic crisis.

The Federal Reserve Board of Governors has shifted its policy stance this year by moving away from an ultra-accommodative approach that relied on near-zero interest rates and quantitative easing (QE), or ” printing money.” This move marks a significant shift in economic direction as the central bank continues to adjust to post-crisis economics.

The news of high inflation rates has been one that many people have worried about for some time now. This month, it finally seemed like the worries were coming true as our Consumer Price Index hit an all-time high annual rate of 8.5%.
A slight retreat from this lofty peak seems to indicate a return towards more normal levels – but don’t count out these concerns just yet.

The Federal Reserve has left the door open for future rate increases, but will not do so unless there are clear signs of inflation dissipating. As chairperson Jerome Powell said in an interview at this year’s Wall Street Journal festival on Tuesday evening – he needs “convincing evidence” before speeding up interest rates again.

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Minerd’s comments led him to argue that the Federal Reserve seems very little concerned with maintaining what he believes is a bear market. “We are most likely going to have an extensive selloff,” said the CIO of Mining News outlet, reflecting Minerds concerns over economic issues in America and abroad as well rising bond prices which could lead investors away from equities for longer periods of time.

He expects the Fed to continue its aggressive approach. The CIO considers this a form of “overtightening” that could cause asset bubbles in sectors such as tech and crypto.

Minerd is becoming increasingly worried about how monetary policy will impact the economy.
Minerd writes, “With each hike from here on out we’ll be experiencing their effects: higher rates and more restrictive measures.” He believes that before this terminal rate has been reached -which could potentially happen soon- there’s an increased risk of overshooting  which could have devastating consequences.

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