We were long commodities at the end of 2021 and something happened in June 2022 – we saw the sell signals for commodities and we got out of them completely by end of that month.
Inflation was still high at 9.1% in June 2022.
But because the markets are the leading indicator, we believe that inflation numbers will start to go down.
Indeed. Inflation rate fell consecutively for the next six months. The latest December inflation number was 6.5%, lower than the 7.1% for November.
Will inflation fall further?
Yes, because the commodity prices are still on the downtrend.
Is the Fed going to stop rate hikes or even cut interest rate?
To answer that we can look at the futures market for clues. The futures are indicating that the Fed would cut rates in the second half of 2023, even though the Fed dismissed the possibility.
Another indicator is the forex markets. Higher interest rates brings about a stronger currency. That is why USD was rising for the majority of 2022.
But the USD has started to weaken since November 2022. This again is a leading indicator telling us that interest rate might be falling.
So 2023 seems like a bullish year, especially for those investments that have been beaten down due to the rate hikes. Examples are high growth stocks, REITs and crypto.
This year might not be a bad as what most people think it is. Good luck!
