Will The FED Collapse Capital Markets With Their Rate Hikes?
March interest rate hike odds remain near 100%.
Post-jobs report June interest rate hike odds have jumped above 50%.
Now, consider the following.
“Accelerated Fed rate hikes will cause tremors in the Treasury bond markets, forcing rates up, most especially in the two year — just like 1994,” said Edwards in a report.
“The key similarity with 1994 is that currently U.S. two-year yields at 1.35% still trade tightly to the current Fed funds rate of 0.75%. If the market really takes on board Janet Yellen’s much more aggressive rhetoric, then we could easily see two-year yields rise towards the 10-year as we did in 1994,” he said.
In other words, the yield curve might invert and we all know what that means.
But a short-term spike in yields notwithstanding, the strategist believes the global economy faces an even bigger catastrophe when the “massive” credit bubble bursts, courtesy of the Fed.
“The 2007/08 global financial crisis will look like a soft landing when the Fed blows this sucker sky high,” he said. “All that is needed now is for the Fed to sprinkle life-giving rate hikes onto these, as yet dormant, seeds of destruction.”
Well, that's quite a forecast. At the same time, Mr. Edwards is dead on in his assessment of today's valuation and economic environment. The only disagreement we have is as follows. We believe the FED might collapse the markets/economy intentionally. Was Janet Yellen Instructed To Destroy President Trump?
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