New Constructs Value in 60 Seconds: What type of correction is coming

23 Jun 2023 · 1 min

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The Fed is raising rates gradually to avoid a market crash. Each hawkish signal triggers a small correction followed by a rally, but overvalued stocks that plummeted last year stay depressed. Expect a slow, downward drift rather than a sharp crash.

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It's going to be more of a slow bleed, honestly. And I think that the Fed is being very deliberate and careful to ensure that so we don't have an overcorrection. It's going to happen in stages. Those stages are going to occur as they've occurred up to this point. When the Fed comes out and says, oh, nope, sorry, we're not going to be as dovish as you hoped and expected. We're going to have to be more hawkish. We're going to have to continue to raise or hold rates more than people thought. And each time that happens, we've seen a mini correction, but we see it rally right back. A lot of the super expensive danger zone stocks that went way down last year, they are still way down. They had a big rise in January, Feb, but they're back closer to where they were at the end of the year than they were at the beginning. So some of this is sticking. There's a lot of volatility in the near term, but the overall trend is still down. And that trend's gonna continue. I just think it's gonna be more gradual this time around. I know that's not as sexy, but the Fed is doing that on purpose because that's how we make this correction, this reallocation of capital, that's how we make it work and not just allow the buy-on-the-dip people to push things right back up if we were to have a big call, a big crash.