The Sword of Damocles

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While multiples have been smashed in the wake of this tightening cycle, the equity market may yet be vulnerable. Two things will govern the next quarter and beyond.

1. The next inflation print. This above all else will govern Federal Reserve policy. When June CPI is published, will the fabled base effects kick in? Or will CPI prove sticky and persistent? Until it is clearly and sequentially down, all accommodative policy is gone.

2. Corporate earnings. They may yet disappoint as costs rise and the economic environment worsens.

All this to say, not a time to go long, but a time to raise cash.