The US Fed Raises Interest RatesShort commercial/brag
Those of you that follow my posts know that many many months ago I predicted a US Fed finds rate of between 5.5 and 6% when the rate was in the 3s. Well we are now at 5.25% and inflation in the US is still well above the Fed target rate of 2%.
Soooo...where are we now?
As I have said before (I am not a renowned monetary theorist) monetary experts have said for decades (dating back to my days as an Economics grad student - as my wonderful wife would quip - a 100 hundred years ago...lol), there is a long lag between the interest rate hikes and the actual effect of the change.
IMO....the lags are starting to take effect we are getting very close to this point. Witness all the layoffs..not only that Obscure has talked about in the auto industry but also elsewhere. So another 250- 500 baisis points is a reasonable forecast.
Soooo..the big question...where does that leave us?
In short - my scenario isthat, as my smart wife would say "the ducks are lined up" for a recession later this year.
Why?
A few things..
1...we already seen in the US 3 bank failures
2...consumer debt to deal with inflation has risen to levels that a few years ago would have been considered "beyond the pale"
3.. the "compromise" on the US on the debt limits to get an Agreement will result in less federal stimulus spending
This is to name just a few.
The message?
As before...
Be careful and keep some dry powder in your portfolio....this could be the best decision you make.
Will it happen tomorrow?
Naw...not likely
In a 4-6 months?
Yep!!