As expected, the US trading session was highly volatile on the back of the US Federal Reserve’s 75-point rate hike.
The Fed Chairman singled out this would not be the norm, but that another 75 point hike could follow. He also said rates will be around 3.4% by year end.
This is aggressive and in line with my forecast that the Fed will focus late on chasing inflation in the knowledge and ignoring that this will cause further economic pain.
This means recession.
Something, when we first forecast, that others considered a wild call and yet has fast become the central risk scenario immediately confronting the US economy.
Markets may want to play their own deluded clever games of looking across the valley and spinning this into a buying moment, but there is now a sea of distressed investors who want out of the market.
Expect the Wall St types to be buying on the day, only to be eventually overwhelmed by real money selling in the days, weeks and months ahead.
The US dollar had a big ‘buy the rumour, sell the fact’ day. A similar story here, in terms of the immediate selling on the basis that such a Fed move had already become priced in, will face a wall of reality of ever higher US rates buying.
Investors should take advantage of the immediate market volatility, higher stocks and lower US dollar, to protect their portfolios on a medium to long term basis from the fast arriving freight train of recessions in the USA and other nations.
The risks are very high. The next 1-3 days could see the best levels for investors to further hedge their portfolios. Selling stocks, buying the US dollar, as well as Gold and Oil.
Market insights and analysis from Clifford Bennett, Chief Economist at ACY Securities
