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Phil Palumbo: stick with ‘sell the rip’ in 2022

on Feb 17, 2022
  • Phil Palumbo says the possibility of a further hit to U.S. stocks is still alive.
  • He warns that inflation could push even higher in the coming months.
  • The benchmark S&P 500 index is still down about 8.0% for the year.

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“Buy the dip” has been a persistent strategy for equity investors over the past two years, but move with caution is what Phil Palumbo recommends for 2022.

Palumbo sees more volatility ahead

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The S&P 500 index is still down about 8.0% for the year, and the founder of Palumbo Wealth Management says the possibility of a further decline is still alive. On CNBC’s “Worldwide Exchange”, he said:

Ultimately, it’s going to be the year where it’s sell the rip rather than buy the dip because of inflation. If Kremlin doesn’t remove itself from Ukraine, oil prices will go up. Considering where CPI is, that’s a big concern overall for markets. It’ll continue to create volatility, and it’s potential for another big drop down.

Also on Thursday, the Biden administration said it had evidence to believe that Russia is moving towards an imminent invasion of Ukraine. The U.S. stocks are again in the red on Thursday.  

The U.S. Fed might have to be even more hawkish

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According to Palumbo, the U.S. Federal Reserve might be pushed into being even more hawkish because inflation will likely continue to run hotter-than-expected, and he doesn’t see such aggression as already priced into the market.  

Look at retail sales yesterday; consumers are still showing decent demand. So, inflation could push even higher. Look at the yield curve. It doesn’t believe that the economy will continue to grow. It’s potential that the Fed can make a mistake and put us into recession at the end of 22 and going into 2023.

On Wednesday, the U.S. Census Bureau said retail sales jumped 3.8% in January – beating expectations for a 2.1% increase by a big margin.

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