ONE RATE CUT?
"...Given the latest economic data points, the decline of the yield curve, and record leverage at all levels, we suspect the Fed has very little wiggle room.
Don’t be surprised if the Fed is “one and done” in March.
If you don’t believe me, maybe you will listen to the Mises Institute:
“The Fed is trapped in its own web. It does not have much room to raise rates without major complications in the financial market and in the economy. Even if it finally delivers on tapering and starts raising rates, it won’t get any further than it did back in the last rate hike (2015–18) and balance sheet shrinking (2017–19) cycles.”
The Fed’s Precarious Position
Such puts the Fed in a precarious position of tightening monetary policy at precisely the wrong time. The yield curve is already screaming the Fed is hiking rates too late.
Such leaves only TWO possible options, both of them are not good.
- Leave rates at zero to support the stock market, but economic inequality widens further.
- Hike rates and the risks an economic decoupling that leads to a deleveraging process.
The second problem is the most significant. Given the Fed stayed at zero for far too long, the ability to significantly lift rates before triggering a recession has likely passed. Therefore, the Fed may be “one and done” effectively negating the most effective tool for cushioning a recession.
As noted above, by chasing inflation (reactive versus proactive), the Fed has a long history of creating bad outcomes for the market and the economy.
This time will likely be no different.
https://realinvestme...trapped-at-zero
"The run higher in oil prices may only have a little bit longer to run, though. Gold prices lead oil prices by just about 20 months, and so the August 6, 2020 gold prices top is foretelling an oil price top in late March 2022, something we have been discussing a lot in our twice monthly McClellan Market Report newsletter. ..."
https://www.mcoscill...oil_gold_ratio/
