(12 January 2022)  Omicron.  New lockdowns.  And now US inflation hitting a 40-year high of 7%.  Not exactly a great start to 2022.  And yet the stock market has barely flinched as a result of this week’s rebound following Monday’s sell-off.

One way to explain this apparent contradiction is the Federal Reserve. The Fed remains the trusted backstop for Wall Street through its dual mandate of price stability and full employment.  Its commitment to full employment allows the Fed keeps its monetary policy loose which, in turn, supports the stock market through generous injections of QE liquidity.

Problems emerge, however, when inflation exceeds acceptable limits (remember the Fed’s 2% target?) since it forces the Fed to finally get serious and take away the punch bowl.  Yesterday’s Congressional testimony by Fed Chair Jerome Powell affirmed his intention to finally tighten monetary policy and combat inflation after almost two full years of Covid-driven QE.  Most observers now expect a March rate hike as the Fed pivots from bailing out investors to serving the needs of the average American trying to put food on the table.

Stocks are trading just a little below their highs as we approach the Mercury retrograde station at 6.42 a.m. EST, Friday, January 14.  All things being equal, Mercury retrograde stations have a modest bearish bias so we should expect some kind of pullback here.  However, we should note that each Mercury retrograde station is unique since the relative condition of other planets  determines the relative bearishness of the upcoming 21-day retrograde cycle (Jan 14-Feb 4).

This particular station looks more troublesome than normal since Mercury (16 Capricorn) will be exactly square Uranus (16 Aries) and conjunct Saturn (19 Capricorn).  The Mercury-Uranus is very unstable and may symbolize sudden and disruptive developments, especially pertaining to transportation and computers. This setup looks more difficult than the current supply-chain problems and could mark the start of a new challenge that causes problems for the economy.  Also, the Mercury-Uranus square may signify a computer or technology outage such as a cyber-attack or malfunctioning database or undersea cable. The Mercury-Saturn conjunction is bearish, of course, and makes these more negative scenarios more likely.

The bearish effects of Mercury retrograde stations tend to linger beyond the specific day of the planetary reversal.  This lingering effect seems more likely than not here given the concurrent afflictions of the Biden horoscope that I have mentioned in previous posts.

For more details, check out my weekly subscriber newsletter which is published every Saturday afternoon (EST).   In addition to reviewing the key planetary and technical influences on US and Indian stocks for the short and medium term, I also provide an astrological analysis of potential upcoming moves in currencies, gold and oil.

Photo credit: Ben Schumin