It’s The FED Bashing Time
I have maintained for close to three years that the FED will be unable to raise interest rates in any meaningful way going forward. For instance…..
I am 75% confident that the FED will not raise interest rates at all and 100% confident that they will not raise it in any meaningful way. What is meaningful? Even 8 separate hikes at 25 bps each would be laughable here. And while anything above that will matter, I am extremely confident that we will not even get close to that over the next 2-5 years.
Here is why…….
Not much has changed over the last three years. Simply put, Janet Yellen and the FED continue to beat around the bush, unsure of what to do next.
With that in mind, it is getting a lot more interesting. Mostly due to the Trump presidency.
Let’s consider today’s fundamental backdrop.
- I have argued that most assets today (stocks, real estate, etc…) are severely overpriced. Some are sitting at record breaking levels.
- Earnings/revenues are down and/or decelerating.
- Most of the earnings growth over the last few years has been financed by zero interest rates, QE and stock buybacks.
- Trump demands a weaker dollar, more stimulus and higher inflation.
- The FED wants slightly higher interest rates. In order to have the tools necessary to fight the next recession.
Who will win this tag of war……the market, the FED or President Trump?
If history is any guide, the market and today’s unsustainable imbalances/levels will blow in everyone’s face. Whether the FED/Trump want it or not. The only question is….when?
If you would like to find out exactly what happens next based on our Timing and Mathematical work, please Click Here.