The Fed’s 1-Word Rally

It came down to this…

The Fed's 1-Word Rally by: Charles Sizemore | Chief Editor, The Banyan Edge February 04, 2023 Banyan Nation, It came down to one word. Fed Chairman Jerome Powell repeated it at least 10 times before I lost count. And investors have been waiting a long time to hear it… “Disinflation.” Disinflation means slowing inflation — the Fed’s top priority. And as Powell put it: "We can now say, for the first time, that the disinflationary process has started. We can see that." Well … maybe. Core inflation has been trending lower since September. But it trended lower for much of last spring and early summer before reversing sharply higher. And as of the last reading, it was still coming in hot at 5.7%. (Click here to view larger image.) Stocks, and particularly inflation-sensitive tech stocks, jumped on Wednesday and Thursday as investors saw that maybe … just maybe … there was a light at the end of the inflation tunnel. The Nasdaq was up over 3% on Thursday alone. That’s because, if inflation really is falling, it gives the Fed the flexibility to back off on its rate hikes. And remember, the biggest single contributor to the bear market last year was the Fed’s campaign to aggressively tighten monetary conditions. So, if the Fed’s lifting its foot off the brake … is this newfound optimism justified? Are we now starting a new bull market? Adam O’Dell isn’t yet convinced, and has an alternative explanation for the rally: short covering. Some of the highest returns so far in 2023 have been in the lowest-quality stocks. Carvana — the stock our own Charles Mizrahi called “The Worst Stock to Own in 2023” — is up 200% thus far in 2023. And it’s not because the company has suddenly figured out how to make its “Pez dispenser for cars” business model profitable. No, it’s still every bit the dumpster fire of a business that Charles bashed back in December. But the short sellers that made a fortune riding that down from $163 per share to just $3.55 are now buying the stock to cover their short positions. This is setting up what Adam believes could be the greatest short opportunity of our lifetimes. Adam O’Dell and Ian King will be joining me on Monday’s Banyan Edge Podcast to chat about short selling and the massive opportunities that pop up during a short squeeze. This one will be epic, so don’t miss it! Let’s now take a look at what the rest of the team was up to last week… “5 Reasons to Buy Small-Cap Stocks During a Bear Market,” by Ian King. A climate of fear is an investor’s best friend. And as Ian points out, sentiment often sets new lows shortly before the market bottoms. But the stocks that lead in the recovery are not generally the ones that led the previous bull. It’s these… “3 Tips to Survive the Federal Reserve’s Rate Hikes,” by Charles Mizrahi. The Fed just raised rates this past week, continuing the fastest rate-hike cycle in history. But if you’re overly concerned about the Fed, you’re missing the big picture … and a big opportunity. “Long-Term vs Short-Term Investing Strategies,” by Michael Carr. Mike says everything you think you know about investing upside down. You shouldn’t always think for the long term. Focusing too much on the future robs you of the opportunities of the present. So Mike says you should lean into volatility, and start compounding returns a different way… “Don’t Buy the January Junk Stock Rally,” by Adam O'Dell. Adam comes right out and says it! The rally in January was only in the lowest-quality stocks with the most questionable business models. But this isn’t because investors have fallen in love with them again … it’s a result of short selling. Once that rally is done, Adam believes this rally is setting us up for the short of his lifetime. And he’ll be explaining it in detail on Monday’s podcast! Until next week, Charles Sizemore Chief Editor, The Banyan Edge P.S. Speaking of Monday’s podcast, don’t forget write your questions in to BanyanEdge@BanyanHill.com for our weekly Q&A! Adam’s going to tackle a question he received after last week’s research on foreign stocks … and we’d love to know the many more questions I’m sure you have swirling in your mind. This is an uncertain time to be an investor and a saver, but we’re here for you and want to help guide you through it. Just write in to BanyanEdge@BanyanHill.com and we’ll feature your thoughts on Monday’s episode. JPMorgan & Goldman Sachs: Oil's Up Again New JPMorgan report says they “expect supply to grow at 30% above the pace of demand in 2023.” And Goldman Sachs expects this new commodity bull market could easily last a decade. For a limited time, you can get all the details on Adam O’Dell’s No. 1 oil stock right now. An oil stock he’s expecting will hit at least 100% in the next 100 days. Click here to get all the details now. (c) 2023 Banyan Hill Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement. Any reproduction, copying, or redistribution, (electronic or otherwise) in whole or in part, is strictly prohibited without the express written permission of Banyan Hill Publishing. P.O. Box 8378, Delray Beach, FL 33482. (TEL: 866-584-4096) Legal Notice The mailbox associated with this email address is not monitored, so please do not reply. Your feedback is very important to us so if you would like to contact us with a question or comment, please click here: http://banyanhill.com/contact-us Remove your email from this list: Click here to Unsubscribe