Forget the little RBA, it is the Fed that is about to move markets.
The US Federal Reserve is very likely to raise rates today to 0.50%.
There is a case to be made for the idea of raising rates immediately to 0.75%.
Let’s get this ball rolling. The Federal Reserve is so incredibly behind the curve it is embarrassing to the entire nation. The days of easy money are over. Get over it, everyone.
Most market participants will be trying to cross the valley without a bridge believing that as the market is expecting a hike it is already priced in. So take advantage and buy into this.
It is a psychological subset of always looking across the valley and buying the dip which has pervaded equity markets for the past two years with a high degree of intensity.
Human beings’ decision make/functions on the pillars of recency, frequency, and intensity. So we have a perfect setup as the fundamental underpinnings fade away under the hoofs of all the bulls, read the entire herd, and they stand their ground only to find themselves in the midst of nothing but a sea of potential sellers.
As an economists of some years, can I tell you it has never looked as ugly as this.
We are about to begin a historically intense and tectonic plate ripping interest rate hiking cycle by the USFed and around the world. There will be no escape, and this first move should only be viewed as a baby step to what is coming.
A flurry of rate hikes back toward near normal, probably way up at 3.25%. Coming late and attempting to fight inflation, but the nature of this inflation will see the Fed’s efforts being akin to pouring water on an oil fire.
In case you did not know, this is not a good idea. The rate hikes designed belatedly will not work on this latest kind of inflation.
The US consumer will be further squeezed and totally collapse.
Hence the risk of a US recession joining that of China and Europe by year-end. Who would in their right mind cross this valley without a bridge? It will only end in flames.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
