Inflation triggered worst market sell-off since 2020, analyst predicts even more pain - John Feneck
NEW YORK (Sept 15) Markets are reacting poorly to the expectation that "inflation is here to stay," said John Feneck, Founder of Feneck Consulting. The Bureau of Labor Statistics on Tuesday reported that year-on-year inflation was 8.3 percent in August, higher than the 8.1 percent that markets priced in.
"We're starting to see that the Fed's endgame of 2 percent inflation or whatever is going to be a joke," said Feneck on Tuesday. "[The CPI report] shows that we may still see a persistent inflation number despite the Fed's actions."
Feneck's remarks come amid the market's largest single-day drawdown since June of 2020. On Tuesday, the S&P 500 dropped by 4.3 percent, the NASDAQ was down 5.1 percent, Bitcoin was down 9 percent, and gold fell by 1.5 percent.
Feneck spoke with David Lin, Anchor and Producer at Kitco News, at the 2022 Precious Metals Summit in Beaver Creek, Colorado.
Inflation Outlook
Although headline inflation was down to 8.1 percent in August compared to 8.3 percent in July, core inflation, which excludes food and energy, rose to 6.3 percent from 5.9 percent in July. Feneck expects inflation to be "persistent."
The Fed's target for headline inflation is 2 percent, but Feneck said that "The Fed is in some sort of dreamland to think that 2 to 4 percent [inflation] is even achievable." He added that the Fed would require "a lot more hawkish behavior," which would "hurt the broad market," in order to tame inflation.
He also pointed to the role of fiscal policy in contributing to higher prices.
"Powell can't [bring inflation down] all by himself," Feneck said. "He needs assistance. Making matters more complicated, of course, is election day coming up on November 8th."
Polling numbers suggest that the Republicans will gain the House and Senate in the upcoming elections, which may be bullish for markets.
Market Forecasts
The S&P 500 is trading near 3,950 on Wednesday. Feneck predicted that stocks would fall and claimed that his fund has no exposure to broad equities.
"The S&P is going to break 3,900, and it's going to unleash a lot of pain," he said. "And then you've got major support around 3,200, but if we even touch 3,200 to 3,300, there's going to be a lot of people wishing that they would have taken more care of their 401ks."
However, Feneck said that if the Federal Reserve were to pivot, and pause or reduce rates, he would cover all his shorts and "go long on a lot of stuff."
He added that retail investors need to watch what big investors are doing.
"You've got to be careful because as a retail investor, you're a pawn in this game," he said. "The big boys are Goldman, the Bank of America. These are the shops that are pushing things in one direction or another."
To find out which mining stocks Feneck has in his portfolio, watch the video above.
KITCO
