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Bullishness Approaching Mania | Peter Atwater on Market Psychology And “The Confidence Map”

Forward Guidance

NOTE

The Arguments and Psychology Behind Inflation

Inflation has two arguments: one suggests it leads to deflation and recession, while the other argues that it stimulates spending and borrowing. Last year, we witnessed the unintended consequences of panic-induced decisions, which fueled inflation. The Federal Reserve fears inflation becoming embedded in the psychology, contributing to feelings of uncertainty and powerlessness. However, the current cycle is different from the shortages of the 1980s. The speed at which market sentiment affects prices and the economy is faster than ever, as seen during the Russian invasion of Ukraine. Investors must understand their impact on the real economy, especially with the prevalence of ETFs.

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