Will The Fed’s Decisions Turn Into An “Instant Recession?”

2 years ago
5

Last week, we saw the outcome of the “fragility” this article talks about. The Fed raised rates by 75 basis points and the markets immediately rallied, snapping a five-day free fall, only to plunge the following day. A CNBC headline over the weekend reads: “Look for more selling pressure in the week ahead as investors learn the hard way not to fight the Fed.” When bad economic data triggers optimistic market outcomes, then perhaps we can say that investors are just as confused as the Fed, particularly with regard to the latter’s means and capacity to get control over inflation and the economy. Bear in mind that the effect of the Fed’s rate hikes comes with a lag, typically six months minimum to gauge whether its rate hikes were too dovish or hawkish. There’s plenty more uncertainty to come and with that, plenty of more reasons to hedge the outcome with safe-haven assets. A total loss of confidence in the Fed’s ability to rein in inflation will likely result in an “instant recession,” as one analyst says (see article). Historically speaking, a total loss of confidence in the Fed, even more so than inflation itself, is also what tends to launch gold and silver prices skyward.

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