by Jason Bodner

February 1, 2022

We all want to know when the pain and volatility in the market will end. The answer centers around the Fed. Fears of rate hikes started pressuring stocks last November. Uncertainty has continued to clobber stocks and cryptocurrencies. The headlines are squarely focused on inflation and interest rates.

I have a theory on how this will all play out – and it’s not like anything the pundits and media are saying. I’ll give you my playbook here, based on my data analysis and on when I think this choppiness might end.

THE SETUP: Basically, the Fed needs to cool off the rate of inflation without wrecking things. That requires walking a policy tightrope: If they are too conservative, we fall into a recession; if they are too liberal, they could cause hyperinflation.  That’s why every investor has all eyes and ears on the Fed.

I think the Fed has already begun cooling the economy without us even noticing it. In fact, I think the current sell-off was engineered, mostly by the Fed. First, two years ago, due to COVID-19, the Fed had to float the economy with stimulus aid – like Economic Injury Disaster Loans (EIDLs), payroll protection, and unemployment insurance. They also dropped interest rates effectively to zero. Stocks responded by rallying from depths to new highs… all while we were staying home. How do I know this? Robinhood reported tons of $600 and $1,200 deposits, matching the stimulus check amounts. Crypto also soared.

In other words, people stayed home and bought risk assets. Leverage also grew. Low rates and plentiful money make assets go up. Hedge funds and traders who want to beat a rising market often use leverage.

For most of 2020, people weren’t working. Factories shut down. Trucking dropped off. Supply chains crunched. And we’re still feeling effects today. Here’s the simple equation of what happened in 2020:

  • 1 – Low supply and high demand for anything means prices go up.
  • 2 –Oodles of cash in the system means asset prices go up.
  • 1+2 = 3 – Oodles of cash chasing short supply means prices go way up.

As a result, we now have 7% inflation. That’s a problem. Paychecks suddenly don’t stretch as far as they once did. And with the 10-year Treasury yielding roughly 1.8%, investment capital is getting eaten up by inflation’s invisible tax. That’s why investors were chasing assets they hoped would rise by double digits.

So how do we stop inflation? The simple answer is that the Fed must tighten money supply by stopping quantitative easing, and by raising interest rates. But that is not enough. The problem is the U.S. issued so much debt and expanded the balance sheet so much, that the Fed must be careful how it raises rates. Raise too fast, and interest on our federal debt could become crippling. Raise too high, we could get a recession.

But raise too little, and inflation rages on. That’s the Fed’s dilemma.

SOLUTION: TAPER TANTRUM 2.0: To fight inflation, the Fed must take some money out of the system. But if the Fed can’t raise rates too high, what can it do?  One way is to reduce asset prices.

One way to do that is to cause a market correction. They did that through Taper Tantrum 2.0. The Fed released its December meeting notes indicating that it might accelerate money supply tightening. Nothing had actually happened yet, but merely mentioning possible faster tightening torpedoed stocks and crypto.

Merely by indicating future tightening, the Fed knew it could shake the markets. Sure enough, investors slowed buying stocks and crypto because they didn’t know exactly what the Fed would do, or when.

The Fed got help from big banks, too. The Fed indicated three rate hikes in 2022, but Goldman Sachs predicted four rate hikes in 2022. Last week, it upped its estimate to five or more.  JPMorgan’s CEO Jamie Dimon said we could expect wicked volatility through the summer, and “if we’re lucky,” the Fed might engineer a soft landing. These statements by leading bankers shook investor confidence even more.

With fewer investors buying stocks, the major indexes sank because algo-traders and short-sellers try to force stocks down. As cracks appear, the selling cascades. Cryptocurrencies fell sharply as well.

Suddenly, most asset prices are falling. People see red in their brokerage, 401(k), and crypto accounts.

The next step is that people suddenly think twice about spending on any marginal items:

  • “Maybe we don’t need that vacation after all.”
  • “Maybe I can wait to buy that new big TV.”

Lack of buying consumer items means inflation starts cooling, as the money supply has started receding.

And guess what? The Fed hasn’t hiked short-term rates even ONCE yet!

Risk-off selling also removes some leverage. Investors who levered up suddenly face sharp declines. Margin calls come, causing even more selling.

Is This Timing Coincidental, or Part of a Plan?

This market bubble-prick comes at a curious time: The Omicron variant of COVID has peaked. The hospitalization rates are slowing. Government aid and benefits are mostly turned off. None of that good news registers when traders are in fear mode and their portfolios have tanked. Those on the sidelines can only think, “The party’s over,” so people will have to get jobs. (Where else does money come from?)

As labor shores up and the virus threat dwindles, supply issues will begin thawing over time. That should cause prices to fall more. That leads us to the next logical question: What will the Fed do from here?

Goldman Sachs expects five rate hikes this year and Jamie Dimon expects a soft landing “if we’re lucky.”

Remember that these two organizations are very close to government bailouts in the past. Who was in charge of TARP during the 2008 global financial crisis? Hank Paulson, a Goldman Sachs CEO before he became Treasury Secretary. And the original J.P. Morgan bailed out the U.S. government in 1893 and the market in 1907. Old Man Morgan essentially was the Fed before there was a Fed. Might these institutions once again act as agents spreading the Fed’s message to ‘greedy investors’ to cool their speculative ways?

I think so. And all that’s left is for the Fed to cautiously enact a few rate hikes to keep things in check.

But let me assure you… The Fed won’t raise rates five times, or even four. In fact, the Minnesota Fed chairman is on record expecting only two hikes this year, and he worked on TARP! The Fed’s soft-landing is nearly guaranteed. All it had to do was prick the bubble, to start assets falling at the right time.

That means we shouldn’t worry about stocks. Earnings season is here, and most companies’ numbers are stronger than expected.  That should help to calm volatility. We may not immediately go back to new highs, but quality earnings will quell the slide. As for what will fuel stock rallies, it comes to timing.

The Fed wouldn’t start any “ghost tightening” without a solid setup. The Fed has aided and rescued the economy so often for years, even decades, why would it derail us now, as the pandemic winds down?

Listen: Companies are doing phenomenally well, and they should continue to do well. And stocks have weathered far, far worse attacks than fearing tighter rates. In time, the market will digest the Fed’s less aggressive action and resume an uptrend. Then, of course, headline writers will find other fears to stoke.

When Will the Pain End? – I’ll Set a Date!

As for when this slide will conclude, I turn to the data yet again. On March 8th of 2020, I predicted that stocks would bottom on Friday, March 20th. The Dow Jones did exactly that, and the S&P 500 bottomed out just one trading day later, on Monday, March 23rd.  I made that prediction by looking at the selling of stocks since 1990, finding that the average market bottom happened 21 calendar days after severe selling.

Here was the data from that March 8th article:

MAP Signals Table

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Applying that same study, plus a new one, to the current extreme selling conditions, I can predict a low on.

Friday, February 11th, 2022

Here is the data from our newest study:  Both tables have a lot of numbers but here’s what I look for:

The market will likely bottom on February 11th. And once it does, historically speaking, forward returns are spectacular.  Just look at all the green covering the right side of this table!

MAP Signals Table 1

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

CONCLUSION: The Fed has let the market correction do its heavy lifting, so the Fed can now go slow.

This is my theory of the Fed’s “ghost tightening,” which means that things will be just fine. The current volatility is painful, but in the words of Lewis “Chesty” Puller: “Pain is weakness leaving the body.”

All content above represents the opinion of Jason Bodner of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
The Fundamentals Still Apply, As Time Goes By

Income Mail by Bryan Perry
Income Investing Just Got Simplified

Growth Mail by Gary Alexander
Since When Did “Grow Rich” Become Four-Letter Words?

Global Mail by Ivan Martchev
January Reflects Powell’s Influence in the Stock Market

Sector Spotlight by Jason Bodner
When Will the Market Hit Bottom?

View Full Archive
Read Past Issues Here

Important Disclosures:

Jason Bodner is a co-founder and co-owner of Mapsignals. Mr. Bodner is an independent contractor who is occasionally hired by Navellier & Associates to write an article and or provide opinions for possible use in articles that appear in Navellier & Associates weekly Market Mail. Mr. Bodner is not employed or affiliated with Louis Navellier, Navellier & Associates, Inc., or any other Navellier owned entity. The opinions and statements made here are those of Mr. Bodner and not necessarily those of any other persons or entities. This is not an endorsement, or solicitation or testimonial or investment advice regarding the BMI Index or any statements or recommendations or analysis in the article or the BMI Index or Mapsignals or its products or strategies.

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at or by requesting a copy by emailing All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.