by Jason Bodner

February 8, 2022

Since 2022’s first days, stocks and crypto have suddenly turned nasty. Both got pummeled.

Everyone’s question is: When will the stock sell-off stop? 

That begs another question: When will the bull market resume?

I’ll provide my best answers here.

When markets sag like this, it’s easy to think the gloom is permanent. Thoughts arrive like these:

  • The current debt load is insurmountable.
  • The Fed is finally in over its head.
  • This time it’s different.

The news piles on top of our inner negativity, because fear sells. The negative sentiment spirals. But I’m here to offer a bullish counterpoint – my answer on what’s next and when the stock sell-off will stop.

I love great comebacks. Pro sports are loaded with them. Take Kurt Warner, a seemingly promising quarterback from a small college in Iowa, but he was cut from the NFL in 1994. He eventually got a job at a grocery store. Four years later, he guided the St. Louis Rams to their only Super Bowl win, setting several league records, and winning both the regular season and Super Bowl MVP. He is now worth an estimated $30 million. He told his story in a recent motion picture release, “American Underdog.”

Kurt Warner

You never know what might cause a comeback. A century ago, Ecuador was in a recession, but a candy maker named Russell Stover trade-marked an ice cream sandwich called the “Eskimo Pie” on January 24, 1922. At a dime a bar, it quickly became a fad, selling a million a day by summer. That spiked the price of cocoa by 50%, which single-handedly lifted Ecuador out of a depression. I love surprise comebacks!

Maybe we’ll see another miracle comeback in the stock market, but when could it possibly start?

Last week, I showed data that indicates a possible stock market bottom this week, on Friday, February 11th. That’s because this updated study uses the average trough date of 20.4 calendar days after the severe selling starts – a figure based on all of the historical sell-offs, starting in 1990.

MAP Signals Table

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

In fairness, the biggest recent sell day (January 21, 2022) was only 4.2 times the 50-day average, only about half as severe as the average mega-selling examples above, but it’s still intense selling, so we’ll take it as a guide in giving us an expected February 11 trough. That date is curious because on February 10th the Consumer Price Index will come out. The number will likely be horrible, due in part to January’s energy price spike. Natural Gas, Heating Oil, Crude Oil, and Gasoline all rose double digits in January.

If the inflation news rocks equity markets, we might possibly bottom on or around this Friday, my data-driven prediction date. But no matter the bottom date, notice above what happened 3 to 12 months later: a comeback! 100% of all 29 instances showed big gains, averaging +21.3% 12-months later.

Last week, I laid out my theory on what is really happening. Here’s a short synopsis:

Going into 2022, the Fed felt like their hands were tied. They had flooded the economy with easy money for a long time. After rates were at or near zero during the 2008-09 financial crisis – and nearly the entire Obama presidency (2009-16) – rates began rising again (2016-2019), and then COVID hit, blowing the easy money gates wide open once again, pushing short-term rates down to near-zero all over again.


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

For all of 2020, we were told to stay home to avoid the virus. Businesses were shut down. Labor markets were crunched overnight. Yet new waves of government aid – stimulus checks, EIDL, PPP and bond purchases – were generous and constant, rescuing our fragile economy. In 2021, with loads of new money in the system, prices started rising, as the lockdown-caused labor freezes shortened supply.

The old inflation formula revived: “Mucho dinero chasing nada supply = wicked inflation.”

Goldman Sachs now expects five to seven rate hikes this year. JP MorganChase CEO Jamie Dimon expects wicked volatility, saying “if we’re lucky” the Frf could engineer a soft-landing. So, the FED’s only options to battle hyperinflation would be aggressive rate hikes and bond-purchase tapering, right?


Do not forget that two years of easy money created $6 trillion in new federal debts, expanding the federal debt to a mind-twisting $30 trillion. That means each 0.25% rate increase equates to $75 billion in added interest costs. When you talk SIX rate increases in a year, that’s $450 billion in added interest expenses.

The Fed quickly realized that “talking” is their best weapon. The real Fed playbook was inked long ago. In December 1996, Fed Chair Alan Greenspan said two words in passing, “irrational exuberance,” and global stocks immediately tanked. In 2013, Fed Chair Ben Bernanke merely hinted at possible tightening, and he caused a “taper tantrum.” Bonds cratered and growth stocks tanked in short order.

I think the Fed once again used well-chosen words to cause this correction – to avoid having to use a too-aggressive policy to fight inflation. Using aggressive tightening language alone was enough to cool the froth. By threatening faster-than-expected tightening (the Bernanke playbook), stocks and crypto sank intentionally. Growth stocks were particularly mauled because higher rates and less money supply means lower profit margins. Crypto fell by as much as 50% from its high before recovering some last Friday.

Speculators are the main victims. We know that because Robinhood saw a huge influx of $600 and $1,200 deposits, matching the stimulus checks. Some levered-up to buy meme stocks like GameStop (GME), AMC, and crypto. Moneymaking looked easy, but it was really due to easy money lifting assets.

Tightening threats by the Fed halted rises in both stocks and crypto. Levered traders got smoked, many getting margin calls. Long-term (401k) investors also suffered, short-term, but long-term investors can ignore short-term swings. Dollar-cost averaging means you can buy more shares at lower prices now. And many of those who are close to retirement have switched out of stocks into bonds for an income focus.

I think the Fed knows what it is doing and knows that markets will recover. The net effect of this short-term washout is that when brokerage accounts sag, people tend to reduce unnecessarily spending. That helps to bring inflation down and put a cap on frothy asset prices. The Fed hasn’t even raised rates once, but money supply is tightening while asset prices are falling. Isn’t this a “cheap” way to fight inflation?

Navellier & Associates does not own GameStop (GME), or AMC, in managed accounts. Jason Bodner does not own GameStop (GME), or AMC, personally.

Imagine This – a Positive President! (It Could Happen)

Picture this: In two to three months, come Spring, President Biden will come on national television and ceremonially rip his face mask off and maybe even smile (for once) and say, “America, we beat COVID together. There’s no more pandemic. Now let’s get back to work to rebuild America!”  He will also urge everyone to get vaccinated and get all their booster shots, but he will focus on “let’s get back to work.”

That’s the positive message everyone is waiting for. People will cheer. Biden’s dismal approval ratings will lift, overnight. So will stocks. That announcement will spark labor. People at home with no more government or speculative trading income will get jobs. Labor will rise, as will supply. Prices will fall.

Theoretically, even then, two months from now, the Fed may have raised rates only once, or not at all.

In the meantime, Goldman and JP Morgan are effectively working as agents of the Fed, spreading bearish money policy predictions. I’ll remind you once again: JP Morgan has bailed out the government before, and Goldman alumnus worked on TARP. Those two have been in bed with government often in the past.

Then, in Q3, we may see labor growth and economic health occurring without the Fed’s constant talk or intervention, and the market will realize that the Fed is only going to raise rates three times, not seven.

By then, growth stocks that were pounded into oblivion in January will start rising. Why? Because investors will realize they were over-punished in Q1. By year’s end, the soft-landing that Dimon said would be “lucky” is all but assured – by the Fed’s tough-talk and rhetoric, more than actual tightening.

If what I am envisioning here becomes anything close to reality, this means growth is on sale right now. When no one has a reason to own something, it’s a great time to add it. Our 32 years of data proves that growth stocks are a great wealth builder. To date, the Fed has already removed the froth in the form of:

  • Too much money
  • High priced speculative assets
  • High growth multiples
  • Leverage

The Fed will eventually raise rates, but it will be far less punitive than I think is priced in right now. We should see the pay-off throughout 2022, since the market is doing the Fed’s heavy lifting for them.

Here’s a quarter-by-quarter summary of what I see ahead in 2022:

  • Q1: The Fed’s tough-talk tanks assets
  • Q2: Markets stabilize because “we defeated COVID”
  • Q3: Labor booms, tight-supplies ease, and more normal economic activity resumes
  • Q4: Stocks finish strong, led by a growth resurgence.
  • Summary: The Fed reduces bond purchases and raises rates three times, to 0.75%-1.00%

That’s the playbook I see for when the stock sell-off stops and when recovery begins. The “soft-landing” that everyone is saying is impossible is unfolding right now, in front of our very eyes.

I may be crazy, but if I’m right, this is a “mass deception” that is also an opportunity. That may sound crazy, but as Marina Tsvetaeva said: “A deception that elevates us is dearer than a host of low truths.”

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

Please see important disclosures below.

Also In This Issue

About The Author

Jason Bodner

Jason Bodner writes Sector Spotlight in the weekly Marketmail publication and has authored several white papers for the company. He is also Co-Founder of Macro Analytics for Professionals which produces proprietary equity accumulation/distribution research for its clients. Previously, Mr. Bodner served as Director of European Equity Derivatives for Cantor Fitzgerald Europe in London, then moved to the role of Head of Equity Derivatives North America for the same company in New York. He also served as S.V.P. Equity Derivatives for Jefferies, LLC. He received a B.S. in business administration in 1996, with honors, from Skidmore College as a member of the Periclean Honors Society. All content of “Sector Spotlight” represents the opinion of Jason Bodner

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