We’ve touted NASDAQ 9,000 as a bottom for over a year. That’s only 14% off of current levels. Many believe that Technology stocks are cheap, but not in my book. Not in a world where the long-term Fed Funds rate settles around 300 BPS and absent QE.

• No more Fed put? I can easily imagine a scenario where CPI declines to 3-4% over the next year or two and stays there, Fed Funds inches down to be in-line with CPI at 3-4% and QE is non-existent. In that scenario I could see the NASDAQ trading back to 2018-2019 levels.
• Zero percent Fed Funds is not in the cards. I believe it will be difficult for the Fed to justify a zero percent Fed Funds rate again with the Inflation genie out of the bottle. Perhaps a Fed Funds rate that sits at 3-4% in perpetuity will instill some fiscal discipline in Washington – which got drunk on zero percent debt as did corporate America.
• Here’s hoping QE is gone for good. If unemployment were to spike I could see the Fed taking rates down by 150-200 BPS but not going to zero percent. I hope the Fed would not engage in QE in an effort to bolster a weak economy. I hope the Fed Put is gone for good. If that’s the case, if we do not see QE again this decade and if we have a neutral real Fed Funds rate there is no reason why the NASDAQ Composite could not trade back another 30% or more from current levels. No more free money and weak 2023 earnings suggest the bottom is a long way from here.

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