Posted on 01/28/2022 2:49:10 AM PST by EBH
The Federal Reserve is prepared to let the stock market drop another 15% to 20% before it acts in any way to stem the decline, says Greg Jensen, co-chief investment officer at Bridgewater Associates, the world's biggest hedge fund. With inflation soaring and unemployment dropping, the Fed has little reason to act, he told Bloomberg. Consumer prices soared 7% last year, and the unemployment rate dipped to 3.9% in December from 4.2% in November. "Some decline in asset prices is not a bad thing from the Fed's perspective, so they're going to let it happen," Jensen he said. "At these levels, it would take a much bigger move to get the 'Fed put' into the money. They're a long way from that." The "Fed put" is the idea that the central bank will bail out a plunging stock market by easing policy. The Fed might even let the stock market go down more than 15% to 20% without reacting, depending how quickly the downturn occurs, Jensen said. The recent drop has been "mostly healthy," as it has "deflated some of the bubbles," such as cryptocurrencies, he said. Meanwhile, Interest-rate futures traders now expect the Fed to raise interest rates five times this year, according to the CME Fed Watch Tool. Before the Fed's meeting, which ended Wednesday, the consensus among many economists and investors was for four rate hikes this year. But Fed Chairman Jerome Powell issued hawkish commentary after the meeting. So the Fed is likely to be happy with the stock market losing its froth, Jensen said. The S&P 500 index has slid 8% so far this year.
(Excerpt) Read more at msn.com ...
But...falling that far will just be a plateau. That kind of loss in market in a years time is too fast. Once it drops that far, there is no real stopping the deflation of the bubble.
My 401k has dropped over 8% this month.
There is no safe haven, unless you can live with the low returns on MM/CD. Bond mutual funds should be providing that, but they've crippled those too in recent years.
Mine too. But I had to guess the market and transfer funds to a money market fund to stabilize. Fidelity requires a 3-month wait before transferring back to S&P 500 Index fund so it’s a crap shoot whether or not to wait out the storm and transfer back in. I didn’t do that on my Fidelity 401K because I believe money printing still needs to catch up with the market ...so more asset inflation is due in the short term.
If and when they really do tighten, and that’s a big if, the cheap money housing and stock markets will both collapse. In fact pretty much all assets will collapse in dollar-valuation. This is what’s keeping crypto alive imo cuz the USD crypto is still too far out.
You are correct. Nothing is safe as they are actually acting in very unpredictable manners from the Biden White House.
Rates needed to start increasing last September, instead they are looking at 4-5 times in a very short time period, it should have been a much slower rise in rates.
They will be giving everyone too short of time period to adjust to the new rates, especially under the inflationary pressures happening at the moment.
Their actions have strong potential to trigger a deflationary spiral. We will start to see the impact around the 3rd rate hike, rate hikes 1 and 2 will just be worry-wort. 5 quarter-half point rate hikes in a year is too fast.
Fed Willing to Let Stocks Drop 15-20% So Cronies Can Make A Killing While Impoverishing Ordinary Americans
How do you catch a falling knife?
We so needed a business person in the White House...
The old one-two punch. Raise prices thru inflation...decimate your market investments by 15-20%.
Actually it says 15-20% MORE.
So in the end it would be almost a third or more.
David Hunter (”The Contrarian”) who nailed the latest price INCREASE, says expect a “meltup” of 40% in the S&P followed by the mother of all crashes, up to 80%.
Stolen elections have consequences.
“MORE”
A few trillion in market cap here, a few trillion in market cap there... Pretty soon, we’re talking about some real money!
Agree and it can take years to recover democrats burning money fast debt is a poison dart.
I took my expenses for the next year plus out before the drop. I can almost live on dividends and SS after that. Price makers that pay dividends don’t suffer in inflationary times.
With inflation I expect that profits will go up before labor costs do. It is all funny money though. Believe me, someone is making more money in all of this and it will show up somewhere in the economy and market.
Yeah, and I need the dividends to make ends meet. I hate to take them when the principal is dropping like it has.
Go to cash and let the market sort itself out.
Since when is the Federal Reserve concerned with stock market valuations? The equity bubble they created thru QE/stimulus/zero rates has to pop sometime. Another -30% might get equities back to proper “pre-bubble inflation” P/E levels.
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