well, let's turn back to the major indexes.
We do see losses to round out the month of
august four straight down days for the major indexes as
you see the NASDAQ down 6/10 of a percent,
the dow down 9/10 of a percent today. And
these major indexes ending near their session lows for the
month, the major India, this is all down
a little more than 4%. So I do want
to bring in melissa, r mo founder and owner
of the stock swoosh melissa. It's good to see
you and what was a very strong july couldn't hold
through throughout the month of august what was behind this
market action? There's a lot of things behind the
reason that we sold off. First of all,
I really wasn't a big believer that we carry through
in those june 16th lows, we had a pretty
big rally when you look back. It lasted for
about 5, 6.5 weeks, but we really didn't
get anywhere near the market highs if you look overall
where we started the year and where we are now
. Whereas tomorrow september 1st, we only have four
more months left in the year. It seems almost
impossible that we'd even close break even On the year
from where we open and we're definitely not gonna make
a new high. So one of the reasons that
we've been following this whole year and even the last
couple of days since last Friday with a big selloff
is because the overall market is concerned that the Fed
is going to continue to raise interest rates, not
just there this year, but well into 2023 and
specifically the wording by Jerome Powell last Friday was that
this could bring pain to households. Well, no
one wants to hear that. That's not good news
. It certainly isn't good news. And I think
for consumers already digging into savings just to get by
melissa, this could portend some bad news for them
. So we do know the correlation, right?
Higher rates mean downward pressure on the stock market.
What does this mean about the ongoing concern of a
recession? And whether or not a soft landing at
this point is even feasible as the Fed continues to
raise rates. I think we're way past the soft
landing. You know, if you even look at
the year, the way we've had such high levels
of inflation, while we had a slight drop in
gas prices in the last month, we're still almost
double really where we were a year ago or two
, definitely double where we were two years ago raising
rates isn't going to prevent a recession. Some people
are saying we're in a row session, but it's
definitely not gonna bring us back down to a 2%
level of inflation, which is the Fed stated goal
. And the thing is that we kept rates for
low too low for too long now, they're gonna
raise them too high too fast, too quick.
It's going to create a bigger problem again, raising
rates. It's not, it's gonna slow down the
economy. Number one, that's gonna create some hiring
issues where employers choose not to hire people. People
are looking for jobs. They may also get laid
off from jobs. That's a problem. And one
of the reasons that we have such high prices and
everything we're buying right now is we're still supply chain
issues, not enough people are back to work.
There's a lot of jobs available that are still open
right now and we also have to high costs for
diesel fuel. How do you get everything you buy
? I live here in new york city. Everything
comes into the city, in Manhattan in a truck
. So it gets delivered to the stores, to
you directly through trucks. People have to drive on
the road. These are big costs. And until
we want to drill here in the United States and
basically open up american oil, we're gonna have a
problem Here with diesel cost of fuel. And if
you could raise rates to 10%, it's not going
to bring the cost of fuel down. Mm Hmm
. So what should investors do in this environmentalist f
rates are going to continue to rise? Do you
think that people should wait on the sidelines or maybe
start to dip their toe back into the market?
It really depends on your personal situation. It depends
if you're in retirement. If you're in retirement,
you probably should have sat down with a Financial advisor
like 34567 months ago. It's a little late now
to be thinking about selling, could we still be
lower in the market. Absolutely, absolutely. In
fact we can be lower into this week, going
into a long weekend when everybody's on vacation, we
can sell off, we're selling off tonight as we're
talking right now, we're selling off those market for
unknown reason because really nobody wants to go along here
. But if you're young you could could go long
if you can hang in there with another drop but
you might be in for some pain which you don't
want to see in your long term retirement account if
you see that you're down in in something before you're
up because could we break the june 16th lows?
Yes. Is it 100% that we will know,
but that's even a long way from where we wrote
up. So that's gonna be painful for people if
they buy right now, it's very difficult to pick
a bottom, it's very difficult to pick a top
. No one probably thought that the first week of
january this year was gonna be the high of the
market for the Whole year and that as it turns
out is exactly what it will be. So it's
hard to pick the low, I think it depends
on how young you are and how close you are
to retirement and not only that, how much risk
you can take, if you can't stand being in
positions while they're down till they flip around because the
market's gonna recover, it's gonna recover. It always
does. It could be 12 months from now.
It could be two years from now. It may
not be until 2025 after the next presidential election.
And that's a long way away for some people that
are close to retirement or in retirement. Yeah,
I think that's a really good point because we did
see your right record highs at the start of the
year for the first few days and then, wow
. Um the selling that kicked in after that.
I don't think many people did see that coming with
all of the optimistic rhetoric, with the pandemic,
getting behind us, vaccines, treatments, everything available
to fight Covid. But it has been a rough
year. Are you of the expectation that the Fed
will raise rates for a third straight time by 75
basis points come this mid late to september meeting.
Absolutely. Absolutely. Going to raise rates. And
you mentioned a good point about the economy of the
optimism we saw in 2021 that was a very bullish
year. Why? It was a recovery from Covid
when you talk about how the unemployment is. And
you talk about the jobs the United back. There
were jobs that were just added back jobs since before
Covid. So you really can't say, oh my
gosh, we grew the economy so much. It's
so fabulous. We were shut down. Of course
the whole world was, it wasn't just the United
States and I think that that that destruction The devastation
that happened, it's gonna be enduring in the overall
market. It's one of the reasons that we are
having a problem now with inflation again. We're still
having supply chain issues. So yeah, they're gonna
raise rates. That's why the market fell Friday because
the Fed is not gonna take take their foot off
the gas. And and that's what I'm saying.
Interest rates for mortgages for example, 30 year fixed
could be over 8% by the end of this year
. There on 6.9 right, we have four more
months left. They could be well up to eight
and depending on the credit could be higher than that
. That's going to slow down the heart housing market
. That's gonna slow down real estate. Of course
, if you want to go out and you want
to buy a house, you're like, oh my
gosh, I missed the boat. I should have
done it. So you're gonna wait, you're gonna
wait. So that's gonna slow down that industry which
has had a had a wonderful boom actually in years
. So another 75 basis point rate rise on the
horizon melissa as you. And I think the broader
market does expect come this mental late september meeting,
no rate cuts in 2023. That's the message that
we heard from? Cleveland Fed President Loretta Mester earlier
today. At what point do you think policy starts
to change? And we see an easing again,
How long is it gonna take to get inflation under
control? Right. No rate cuts? They said
this morning. So the market was up to start
today, but then we fell off again. The
market doesn't want to hear that. So the market
wants to hear that not only are they going to
ease off and raising rates so quick that they may
cut them. So initially we had that rally back
at the early period of August because they thought there
was some scuttlebutt that they were going to cut rates
in 2023. As you see that's not the case
. The fence thinks the answer to preventing a recession
and cut curving inflation is to raise ray. But
I'm telling you they're not at the crux of the
problem. These people are flying at 30,000 ft,
they're not going to the store. They they're they're
not even probably ordering stuff for many of the places
that you and I you know, I mean they're
in racket that they're not living day to day lives
and to say that it's okay for people to suffer
to say that it's ok okay for people to bite
the bullet. I think that's terrible. And I
think when you have regular everyday people that are living
paycheck to paycheck that really support most of the economy
and pay the taxes in the country, you want
to have a system that supports that. We tried
to do that through the stimulus. We tried to
do that by getting right back on their feet with
the P. P. P. With the small
business loans. They tried to do everything they could
in the government, the administration with that. But
now it's time for the Fed to back off a
little bit. I'm not saying they have to drop
rates, I'm saying they have to slow down on
raising rates. I bet if you saw them only
raise rates a quarter, which you're not gonna do
, they're gonna raise in three quarters. Like you
said, if they only raised a quarter, I
bet you'd see a big rally. And I'm not
saying we don't have a rally in december christmas rally
, but we're so far off the highs right now
that even into the next certain season, even if
Apple amazon all the stocks you love Tesla, even
if everything blows out their earnings, which they're not
, which they didn't last quarter. But if they
do, you're not gonna see the market have a
big enough lift. So you say, why would
you go along here if, you know, you
can get a price of something lower, you wait
, if you could be patient, you wait.
And again, if you're in retirement now, I
think you missed the boat to get out of your
positions when you were up more, you know,
in the first quarter of this year, Melissa,
R mo, thank you as always for the breakdown
. Melissa is the founder and owner of the stocks --> .