Steve Sears, President of asset management firm Options Solutions has suggested that with the ongoing Federal Reserve tapering measures, investors will no longer be motivated to take risks in the market.
Speaking to TD Ameritrade Network, Sears indicated that measures like the low-interest rate environment pushed investors to explore the risk curve, but fortunes could change with the Fed set to increase rates in 2022.
According to Sear, investors might approach the market with caution once the Fed completely withdraws support. He noted amid the expected tapering; the stock market appears to be reacting well with the futures rising; however, he called for caution.
“What too few people I believe are focused on is what happens when the Fed stops supporting the market. When that mighty Fed input is set to expire. So, I think now this is the key fact, and everyone’s talking about the futures are up and the start of the new year seems great. But what happens when the Fed doesn’t step in and rates don’t lower<…>That’s exactly what I’m keeping my eye on and that’s the thing that I think we all have to ask ourselves. ,” said Sars.
He added that it would be interesting how traders approach the market because a majority have not participated in one not supported by the Fed.
On the stock market outlook, Sears stated that it is challenging to predict, especially with the withdrawals of support from the Fed.
‘The market might experience tension’
However, he believes there will be a tussle between companies that take long to generate revenues and those that embark on profitability immediately. Sears further suggested that the long duration and short duration stocks will result in market tension.
Furthermore, Sears believes that based on the current market conditions emanating from the pandemic, the market has no support to be aggressively bearish. At the same time, he stated that the Federal Reserve stimulus policies have resulted in extraordinary inflation pressure.
Due to the inflation pressure, some analysts have projected that the market will experience a massive crash in 2022. As we reported earlier, businessman and author of the personal finance book “Rich Dad Poor Dad,” Robert Kiyosaki, believes that the current inflation figures are fake and will act as a trigger for a significant market crash and depression.
Elsewhere, Kiyosaki now believes that the crash is already occurring, stating that the market is already in a technical depression based on differences between inflation and economic growth figures.
What the full interview: How Investors Should Approach 2022?