Is the Fed Going to Trigger a Market Meltdown?

Last week the Fed announced it intends to hike rates another two times this year, with three more hikes next year. The Fed also announced that it will continue to increase its QT program with the goal of eventually withdrawing $50 billion in liquidity per month, or some $600 billion per year.

The market didn’t like this announcement, with stocks in a sea of red. This has raised the question… “is the Fed going to trigger a market meltdown?”

How you answer that depends on who you ask. If you ask an investor in many of the emerging markets, the answer is… “The Fed already has.” The Emerging Market ETF is down 15% from its recent peak, while other specific emerging markets such as Brazil are down 20% year to date.

All of this can be squarely set on the Fed’s shoulders. Both the ECB and the BoJ are tapering their QE programs. The former will end its QE program in December, the latter… who knows? The point is, both are easing, while the Fed is hiking rates 3-4 times per year AND withdrawing liquidity to the tune of $30 billion per month.

My point is that while most Central Banks are easing, the Fed is TIGHTENING as if it’s dealing with runaway inflation. This is forcing the US Dollar higher which in turn is putting the highly $USD leveraged system under duress.

If the Fed doesn't figure this out soon, we could very well see the carnage of the Emerging Markets space spread into the S&P 500. I remain VERY bullish in the intermediate term, but the Fed could make things NASTY in the short-term if it doesn't fix this,

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

We’ve extended our offer to download this report FREE by one week. But this week is the last time this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

Comments

Truth Eater Mon, 06/18/2018 - 12:20 Permalink

Why would you want the Fed & ESF to continue tampering with any remnant of a market?  The damage has been done for many years now.  Getting the Fed out of the pattern of PPT pumps for every drop in markets is more desirable to me.

J J Pettigrew Mon, 06/18/2018 - 12:22 Permalink

The Fed is not a world community Central Bank.  It is not charged with synchronizing with other Central Banks.

It's focus should ONLY be their 3 mandates.

Rates are still well into the lower levels in HISTORY. They still reside below inflation. Now, well below.

 

The Federal Reserve has no right to promote ANY INFLATION.

The second mandate under which they are ALLOWED to operate is STABLE PRICES...(first mandate is maximize employment)

The 3rd mandate is Moderate Long Term rates.....not record lows.(for extreme is not moderate by definition)

Thus, the Fed is in constant violation of two of its three mandates.....and not a word....because it makes stocks go up....and disguises the real cost of massive debt creation by the government. (The Fed is apolitical?)

If inflation is a tax (and it is per Friedman) Congress has that power, not an unelected panel sitting behind closed doors. Would a 2% tax on dollar holdings pass a Congressional vote? OF COURSE NOT. So why do we sit and watch the Fed do this?

Where does that process, deciding the cost of money (interest rates)  fit with a FREE MARKET?

economicmorphine Mon, 06/18/2018 - 13:12 Permalink

" I remain VERY bullish in the intermediate term, but the Fed could make things NASTY in the short-term if it doesn't fix this"

 

...because a prolonged period of zero interest rates is the most natural thing in the world.  Geez, and these people are in the capital management business?