The major stock indexes are in such perilous positions that it’s hard to consider any long, equity positions right now. Last week we highlighted ProShares Short QQQ (PSQ) as a way to hedge or profit if the NASDAQ face planted. Well, that happened and if the NASDAQ closes below 11,500, the face first shot might knock out a few teeth too.
Shorting stocks is a tough road for individual investors as, theoretically, potential losses are unlimited, possible margin calls can eat up your account equity… It can get real ugly fast if the tide turns against you.
Cash might really be king right now with inflation coming in hotter than expected. Yes, we know the TV talking heads told you inflation is slowing, but the stock market falling 4% says otherwise. Many on Wall Street believe The Federal Reserve will raise interest rates more aggressively than expected. If that’s the case, the US Dollar will likely continue to trend higher.
A higher dollar means lower profits for global companies like Apple, inflation-sensitive investments like stocks, oil, real estate, and gold… take a hit. There really won’t be a whole lot of places to hide. So, cash might just sit on the throne for a little while.
As you can see on the chart below, the US Dollar got turbo boosted higher in 2022 as Jerome Powell and the Federal Reserve went into inflation fighting mode. The greenback has traded in an upward channel for most of 2022. We are just a few points away from the buck setting a new 52-week high. As an old mentor used to say, “New highs are usually followed by newer, higher highs.”
As long as King Dollar remains in trend, it could be tough sledding for stocks and commodities…