- Jun 6, 2007
- 852
- 483
- 910
The U.S. stock market in 2023 had a banner year it turned the consensus predictions completely on their head, the S&P 500 stock index was up twenty-four percent and the NASDAQ stock index was up forty-three percent (pursuant to the Wall Street Journal)! Prudent analysis would assess that the reason for all this investment exuberance is based on a false premise which unless this view is corrected, the nation is being set-up so the financial markets and the overall economy experience a major drop-off! The premise has two parts one that inflation is under control and on a good trajectory, that is accurate and offers nothing to be concerned about; however, the second part is that since the alarming inflation rate rise was checked and put on a course to the needed two percent growth per year goal interest rates across the economy can now normalize and normalize at the new normal what the nation has seen since the 2007-2009 Great Recession which is a Federal Funds rate of around two and a half percent and all the major interest rates across the economy correlated accordingly. These interest rate predictions are way off the mark and spell trouble for America if they are widespread embraced!
High inflation is a fatal cancer to a free capital economy, for fixed income seniors it diminishes their standard of living, it hurts workers because they have to struggle to get commensurate pay raises and deal with the high interest rates high inflation wroughts and it hurts employers by increasing their expenses at an inordinately high rate and similarly having them deal with high interest rates plus the economic environment becomes very volatile thus diminishing business opportunities. Prudence would assess that there still is strong upward pressure on inflation; oil is going up in the medium to long term Saudia Arabia which essentially controls the price needs oil to be at $86.00/barrel (per IMF) to balance its budget and wisdom calls for the conclusion the Saudis will accomplish this needed goal, no one has been able to solve the high cost of housing in America which will drive inflation and the past inflation problem has a residual upward pressure effect on inflation as it cycles higher wages into the inflation rate. The bottom line is that even if the inflation rate stays in the two to three percent per year range this year and looks to stay in that range the Federal Reserve Board cannot lower interest rates below four percent and because this high inflation rate problem is so dangerous to the economy the Federal Reserve Board will have to maintain higher than normal interest rates, meaning not below four percent, for at least another eighteen months to insure that the high inflation problem has permanently gone away in America. So the U.S. economy will not see a Fed Fund's rate below four percent until June of 2026; this reality will shock America's investment and business community; America will likely see a ten percent correction in the financial markets come the second half of this year or the first half of next year when this reality sets in and America's executives will be talking moderate income growth expectations so Americans needs to continue to brace itself, the effect of the nine percent inflation rate spike isn't over and won't be for another two and a half years; Federal Reserve Chairperson Jay Powell should level with the American people and pop the balloon of all these voices saying we had a soft landing the matter is over, Chairperson Powell needs to give stronger guidance on the earliest date when interest rates will normalize and block the irresponsible behavior going on here!
High inflation is a fatal cancer to a free capital economy, for fixed income seniors it diminishes their standard of living, it hurts workers because they have to struggle to get commensurate pay raises and deal with the high interest rates high inflation wroughts and it hurts employers by increasing their expenses at an inordinately high rate and similarly having them deal with high interest rates plus the economic environment becomes very volatile thus diminishing business opportunities. Prudence would assess that there still is strong upward pressure on inflation; oil is going up in the medium to long term Saudia Arabia which essentially controls the price needs oil to be at $86.00/barrel (per IMF) to balance its budget and wisdom calls for the conclusion the Saudis will accomplish this needed goal, no one has been able to solve the high cost of housing in America which will drive inflation and the past inflation problem has a residual upward pressure effect on inflation as it cycles higher wages into the inflation rate. The bottom line is that even if the inflation rate stays in the two to three percent per year range this year and looks to stay in that range the Federal Reserve Board cannot lower interest rates below four percent and because this high inflation rate problem is so dangerous to the economy the Federal Reserve Board will have to maintain higher than normal interest rates, meaning not below four percent, for at least another eighteen months to insure that the high inflation problem has permanently gone away in America. So the U.S. economy will not see a Fed Fund's rate below four percent until June of 2026; this reality will shock America's investment and business community; America will likely see a ten percent correction in the financial markets come the second half of this year or the first half of next year when this reality sets in and America's executives will be talking moderate income growth expectations so Americans needs to continue to brace itself, the effect of the nine percent inflation rate spike isn't over and won't be for another two and a half years; Federal Reserve Chairperson Jay Powell should level with the American people and pop the balloon of all these voices saying we had a soft landing the matter is over, Chairperson Powell needs to give stronger guidance on the earliest date when interest rates will normalize and block the irresponsible behavior going on here!
