Nasdaq went "no bid" on 9/13 with zero stocks advancing. 13 of 13 times, Nasdaq 100 higher median 12M gain 21%. When already >25% drawdown, median gain +64%

In 2H2022, there have been two separate days where markets saw massive declines:

  • post-Jackson Hole on 8/26
  • post-August CPI on 9/13

In both instances, equites were reacting to re-calibration of Fed expectations. That is, when investors see risk of tighter Fed, stocks have fallen in a broad retreat. The negative reaction to future Fed policy is logical.

But this does not mean stocks have to break below the June lows (sure, a retest is possible). Foremost, we view June 10, 2022 as the date of the fundamental capitulation -- the date investors essentially lost all hope regarding containing inflation. By contrast, the larger debate today is whether inflation is "sticky" or will soon "fall (maybe fall like a rock)."

If inflation has peaked in June 2022, then stocks arguably made their structural low

If inflation has indeed peaked, this is important for arguing stocks have already made their low, or at least their structural low. The 1970-1985 inflation saga underscores this point:

  • S&P 500 made a major low every single time "headline CPI" peaked
  • This was followed by a strong equity rally lasting 3-years plus
  • Equities did not bottom on "core CPI" peaking, but "headline"
  • June 2022 is arguably the "headline CPI" peak
Thus, even for those in the "inflationista...

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