If inflation is indeed “dropping like a rock,” then the “Fed could do far less tightening as the market is doing [the] Fed’s work,” he added.
“Take a step back. If inflation by December 2023 is 2.8%, and Fed funds by December 2023 is 4.6%, this could be viewed by investors as constructive. After all, monetary policy by then is already restrictive, and there would be room to cut rates,” Lee said.
“US corporates remain impressively resilient, enduring the pandemic global shutdown with cost discipline, and US corporates are weathering the inflation surge impressively as well,” Lee said.
Finally, investor sentiment “is rock bottom and worse than the Great Financial Crisis by some metrics,” Lee said.
“There are greenshoots,” Lee concluded.
