Stock Market Crash 2022 Update: It’s Hammer Time

Brett Owens, Chief Investment Strategist
Updated: July 6, 2022

You’ll probably get hyped, boy, ‘cause you know you can’t 
You can’t touch this
Ring the bell, school’s back in
Break it down!
Stop, Hammer time!

Rapper and dancer Stanley Kirk Burrell—better known as MC Hammer—penned this poetic verse in his 1990 hit “U Can’t Touch This.” (Rick James shares songwriting credits, by the way, because Hammer borrowed James’ opening riff from “Super Freak.” Thanks to Wikipedia for clarifying something I’d always wondered about but never took the time to look up.)

Been awhile since you thought about Hammer? Maybe it’s time to start tuning your dial over to the 90s on 9 and Downtown Julie Brown next time you make a trade.

As we’ve discussed over and over and over (and over!) again, the Federal Reserve is no longer our friend. For many years, Fed Chair Jay Powell printed money prolifically. He lifted asset prices across the board, including our dividend stocks.

(Hey, we’re not arguing—and we took profits. We’re just sayin’.)

Last week we compared Jay to “Hans” (aka the “Yodel Man” and “Yodely Guy”) in the old Cliff Hangers game from The Price is Right. The Chairman grew the Fed’s balance sheet to nearly $9 trillion, and it was all looking fine for a bit:

For Years, the Fed’s Balance Sheet Climbed and Climbed

On the gameboard above, Jay is approaching 2020. Uh oh, Jay. Not good. Look out ahead!

But Jay was ready. He had our backs. He fired up his printing press and created a cool $4+ trillion. This was enough to support the stock market and the economy through the rest of ’20 and ’21.

Too much, actually—and now he’s left to mop up his inflationary mess.

Our balance sheet climber is (finally) shedding assets and raising rates. This is the responsible thing to do because it sops up all the extra money sloshing around.

Unfortunately, Mr. and Ms. Market like liquidity. They might even be addicted to it after 14 years of being “on the juice.”

When the Markets sniff out tightening, they throw a big fit.

We have only seen a couple of rate hikes. The Fed’s balance sheet is still fully stocked. Yet the stock market is already tumbling:

Asset Prices Fall Off a Cliff

Gene Tannuzzo summed this up perfectly. The head of fixed income at Columbia Threadneedle Investments told Bloomberg:

“The Fed has entered into a policy cocktail that we would describe as hammer time.”

(I’d have transcribed with a capital H, but I’ll take that up with Bloomberg rather than Gene.)

Look, we’re all in a hurry to buy these dips and start compounding these delicious dividend yields. I am as greedy as you when we see these declines.

But it’s not time yet.

As much as I want to compound dividends, the math—and profits—are just that much better if we can sidestep “Hammer time.”

Let’s wait for Fed’s song to end before we go shopping. In Hammer time, all asset prices are likely to get, well, hammered.

Break it down!

Seriously, this 50-year inflation storm is no joke. The Fed’s failure to get a grip on inflation has set up the biggest retirement disaster in history.

Traditional inflation hedges like gold and silver are not the right answer.

No, the way through this mess is to start collecting monthly income of 6%, 8% or even more every year while truly protecting our nest egg against soaring prices. Hammer time will eventually end, at which point we contrarians will go shopping for these bargain monthly dividend payers—click here and I’ll explain more.