The stock indices were mostly lower on the FED’s decision to hike interest rates. Let’s take a look at the latest…..
Fed Hikes Again, Modifies Accommodation Language, Plans on 2 More Hikes in 2018
The Fed’s “Dot Plot” part of the Fed’s Projection Materials, show a majority of FOMC participants now expect the Fed to get in two more hikes this year.
I side with the two brave souls who suggest none. Regardless, the key point is we are very close to the end of tightening. The participants expecting 4.0% or even 3.5% rates are in Fantasyland.
Yield Curve Collapse Signals ‘Policy Error’ Looms After Hawkish Fed Statement
“The current shape of the U.S. yield curve is consistent with a recession in early 2020”. One more rate hike and this is inverted!
It is also important to note the extent of the tightening cycle here.
To give all of the above context, this FED tightening cycle has been unprecedented in many respects. The FED funds rate is up close to 200% since tightening started in late 2015. The 10-Year Note Yield is up 100%. The yield curve is near inversion and some inflation readings are picking up.
That is to say, if history is any guide all sings point to a major bloodbath in the stock market. Well, unless it is truly different this time.
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