The fed hiked rates today by 0.75%.
They have also moved to meeting by meeting data dependency.
Since they've done both in one meeting there is the possibility that if inflation continues higher for a few months they will be unable or unwilling to cut rates to save the economy from the earrings recession likely on the way.
In short the supply side situation is still not resolved leading to over supply of certain goods and under supply of others. Oversupply of goods in typical capital overproduction is what breaks the system due to over competition and thus lower prices. utility theory of value applies until extreme highs/lows of supply and demand shows the underlying labor relations. This imbalance will lead to a slow down in growth and thus an earning recession. Q3 & Q4 are thus likely a prolonged period of reduced demand coupled with oversupply.
Such conditions will allow the FED to pivot, reduce rates and step up asset purchases late in Q4 or early Q1 as they will be reluctant to cut rates and "save" the economy from low growth while jobs numbers are high and inflation stabilizes in Q3 and Q4 even if that's what is needed it would be politically dangerous until after the election.
If you're a bull you want the jobs numbers to decline quickly in a sharp recession allowing the FED to pivot sooner. If you're a bear you want inflation numbers to be sustained and plateau while jobs numbers slowly come down.
I for one am bearish on the current overall trend and that is unfortunate since it means real pain ahead for actual people not just numbers on a screen. Always remember that little nugget is conditional to you making money anthropomorphic reader I am creating on the fly.
Probably shouting into the ether on this one...which reminds me of a good long trade actually given the merge...hmm.
They have also moved to meeting by meeting data dependency.
Since they've done both in one meeting there is the possibility that if inflation continues higher for a few months they will be unable or unwilling to cut rates to save the economy from the earrings recession likely on the way.
In short the supply side situation is still not resolved leading to over supply of certain goods and under supply of others. Oversupply of goods in typical capital overproduction is what breaks the system due to over competition and thus lower prices. utility theory of value applies until extreme highs/lows of supply and demand shows the underlying labor relations. This imbalance will lead to a slow down in growth and thus an earning recession. Q3 & Q4 are thus likely a prolonged period of reduced demand coupled with oversupply.
Such conditions will allow the FED to pivot, reduce rates and step up asset purchases late in Q4 or early Q1 as they will be reluctant to cut rates and "save" the economy from low growth while jobs numbers are high and inflation stabilizes in Q3 and Q4 even if that's what is needed it would be politically dangerous until after the election.
If you're a bull you want the jobs numbers to decline quickly in a sharp recession allowing the FED to pivot sooner. If you're a bear you want inflation numbers to be sustained and plateau while jobs numbers slowly come down.
I for one am bearish on the current overall trend and that is unfortunate since it means real pain ahead for actual people not just numbers on a screen. Always remember that little nugget is conditional to you making money anthropomorphic reader I am creating on the fly.
Probably shouting into the ether on this one...which reminds me of a good long trade actually given the merge...hmm.
