(Kitco News) - Tuesday's data release from the Bureau of Labor Statistics suggests an annual inflation rate of 7.1 percent in November, below expectations. Over the past year, the Federal Reserve has been tightening its monetary policy, raising interest rates and selling assets in an effort to control high inflation, which peaked at 9.1 percent in June.
Tuesday's lower CPI reading suggests that the Fed has inflation"under control," said Jason Shapiro, Principal at Jason Shapiro LLC.
“As of now, it seems like [The Fed] has done the job of getting [inflation] under control," he said."Money supply has gone down a ton. That's really what inflation is, a function of the money supply."
Shapiro, a contrarian trader featured in Jack Schwager's 2020 book Unknown Market Wizards, said that stock market sentiment is currently"horrible," which is exactly why he is"bullish" and intends to go"long" on equities.
“There is a major consensus out there right now that there's a recession coming next year, and therefore the first half of next year in the stock market is going to be very bad," he said. "I personally think it's going to be the exact opposite of that, and I think that the time to be long is now."
Shapiro spoke with David Lin, Anchor and Producer at Kitco News.
Recession Risk
Several analysts have forecast a recession in 2023, but Shapiro said he"can't believe" a recession is coming, based on his observations.
"I'm not an economist, I can't forecast economics… [but] all I see at this point, right now, is the opposite of a recession," he said."The amount of people out and about and spending money is incredible."
However, Shapiro said that a recession does not necessarily affect stock markets.
"Let's say there is going to be a recession," he explained."Does that guarantee that the stock market has to go down? I don't really think it does. It depends on how people are positioned in thinking about it, going into it. This is why I am bullish the stock market."
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| Outlook for 2023: Stock markets will 'easily' drop to 'pre-COVID levels' - Gareth Soloway |
Contrarian Trading
Shapiro is a contrarian trader, meaning he takes a position opposite to market sentiment, claiming that if a contrarian trade is timed correctly, then major gains can be made. He depends mostly on the weekly Commitment of Traders (COT) report to determine extremes in market sentiment.
"I believe that the herd is right for periods of time, and wrong over time," he explained."You don't want to get caught up against them in that period of time."
He added that he never makes trades unless he gets"confirmation" that he is correct.
"I don't make a trade until the market confirms what I'm looking for," he said.
To find out which sectors Shapiro thinks will 'outperform' in 2023, watch the video above.
Follow David Lin on Twitter: @davidlin_TV
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