Do NOT Panic: Why I Believe Stock Market Has Bottomed as of Mid March 2022

In any era, and in most market historical timeframes, this curve inversion would indeed be a signal to get cautious. After all, this is the economic Dim Mak. But at the same time, I see reasons to ameliorate the concern:

– “real” interest rate curve is still in a normal slope
– in 2006 and 2019, when the nominal curve inverted, the “real” curve also deeply inverted
– variant development vs other curve inversions

– inflation curves are in deep backwardation (spot far higher than future inflation)
– implies the market seeing “episodic” inflation
– leading indicators like Cass Freight Index, port backup volumes, car inventories rolling

– “real” cost of 10-year money is still negative
– supportive of risk assets, as real borrowing costs are essentially “free”
– what asset benefits from negative “real” rates? Stocks
– argues P/E can expand

In short, the reasons above seem to be supporting the rationale for why stocks are still “whispering” bottom. I am not trying to dismiss the economic risks — those are real. And the future is uncertain.