This is what losing control looks like after nearly 2 years of interest rate hikes.
Even though most investors will argue that is net positive, it is anything but. Just wait until the stock market reverts to its mean. And that is where it gets interesting. Now that Fed President William Dudley is stepping down in Mid 2018, he is actually beginning to make sense.
The Federal Reserve may have to “press harder on the brakes” at some point over the next few years, increasing the risk of a hard landing for the economy, New York Fed President William Dudley said Thursday.
The risk of economic overheating “seems like an odd issue to focus on when inflation is low, but it strikes me that this is a real risk over the next few years,” Dudley said in a speech to the Securities and Financial Markets Association.
This suggests that the Fed might have to be more aggressive with those rate hikes, the New York Fed president said.
In another words, everyone and their day trading grandma believe the FED will backstop any sort of a significant correction with easing and more QE. BTFD!!!
Weather it will work or not is an entirely different question, but all of the above is best described by the following chart.
Having said that, this is indeed meaningless because we are already in a historic bubble of massive proportions. Yes, the everything bubble.
There is no way out of this and there are no gradual solutions. At this point it is a matter of perception or waiting for a time window when investors will finally lose faith in the FED. When that threshold is reached the stock market will correct in a spectacular fashion. If you would like to find out when that happens, please Click Here