Stock Investors Are Extremely Anxious in Trying to Pick the Bottom

The price swings of yesterday serve just as a reminder of the extraordinary volatility we are now seeing.

Economic Stability Inflation is still rampant, particularly in some of the stickier areas like food, where it is at levels last seen in the late 1970s. Furthermore, I haven't really seen any significant decreases in rent, and it seems like energy costs are attempting to sneak back up.

However, wage growth is still robust, and there haven't been any significant decreases in the work force or large-scale layoffs. In other words, the bulls could have just made another false start.

Some bulls are once again claiming that the higher CPI readings represent "peak" inflation, but an increasing number seem to feel that the Fed will change direction sooner than anticipated due to other economic worries.

The Fed's initial area of concern would probably be the impact on the US labor market. But many economists think there is capacity for the Fed to raise rates and hold them there for a lot longer than Wall Street anticipates, given that unemployment is just 3.5%.

Others think the Fed will be persuaded to undertake lower rate increases or perhaps to suspend them as a result of problems developing in other financial markets or institutions. Along with that, there is also the worry that a financial blunder may ultimately lead to a larger financial crisis with repercussions for all international markets.

For your information, the markets anticipate a 95% possibility that the Fed will increase interest rates by an additional 75 basis points at its forthcoming FOMC meeting on November 2. And there is a 70% possibility that they will increase rates by another 75 basis points at the FOMC meeting on December 14.