Juggling Dynamite

Danielle was a guest with Jim Goddard on Talk Digital Network, talking about recent events in the world economy and markets.

Here is a direct audio link.

January brought gains across most asset classes, especially for the junkiest debt, equities and crypto-Ponzis.

The bulls are chomping at the bit to convince us that the 2022 loss cycle is now over. However, it bears noting that big rebounds have been a regularly recurring feature within bear markets since time began.

The Bloomberg chart below summarizes the 20 S&P 15%+ rallies within larger downtrends from 1929 to 2008. Buy and holders should beware.

There has also never been a bear market low that occurred before the US Fed paused a tightening cycle. In every case, stocks fell for months after the first cut. Today, the US Fed is still in tightening mode via rate hike plans and ongoing Quantitative Tapering.

The US Fed’s next rate announcement is due on Wednesday, and the consensus expects a 25 basis points (bps) increase, raising base rates in the banking system to 4.25 to 4.75% from 0 to .25% one year ago. Lest anyone forget, the Fed is also reducing assets on its balance sheet (QT) by $95 billion monthly (equivalent to a further 200bps of tightening annualized).

Meanwhile, this month, irrational exuberance in risk markets is acting as if nearing the end of rate hikes is an all-clear signal. In reality, the record tightening to date will be slowing the economy over the next year at least, and the average time from the pause to a stock market low is 16 months with a 24% loss.

A worthwhile update is offered in this segment.

Danielle DiMartino Booth, CEO & Chief Strategist at Quill Intelligence, discusses the Federal Reserve’s latest moves, inflation, the debt ceiling, and Fed reform with David Lin, Anchor and Producer at Kitco News. Here is a direct video link.