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Inflation and the Fed are causing a one-way trip to market misery: Jim Bianco

Market predictor Jim Bianco has warned that Wall Street is on a one-way journey to misery until inflation peaks and the Federal Reserve stops raising rates.

“The Fed has only one tool to bring about inflation, which means it needs to slow down demand,” Bianco Research’s president told CNBC.Fast money“Tuesday.” You may not like what’s going on, but I don’t think they’re too angry with what they’ve seen on the stock market in the last few weeks in Ecklesville, Washington. “

The S & P 500 Dropped for 5 consecutive days, I went deep into the bear market on Tuesday. The index is 23% off from the record high hit on January 4th. Nasdaq 33% off, Dow 18% from each highest record.

“We are in bad news. It’s a good news scenario because you have. 390,000 jobs in May,“Bianco said,” they [the Fed] They feel that they can miserate the stock market without causing unemployment. “

On the other hand, benchmark 10-year government bond yield It has reached the highest level since April 2011. It is currently around 3.48%, up 17% from last week.

“Complete confusion right now”

“The bond market, and I use very technical terms, it’s a complete mess right now,” he said. “The losses we’ve seen in the bond market to date are the highest ever. It’s becoming the worst year in bond market history. The mortgage mortgage market isn’t as good as it is. The liquidity is terrible.”

Bianco Inflation comeback 2 years. About CNBC’s “Trading Nation” in December 2020He warned that inflation would skyrocket to highs not seen in a generation.

“Quantitative monetary tightening is imminent. The biggest buyers of bonds are leaving, and that’s the Federal Reserve,” Bianco said. “You intend that they will be very hawkish with a rate hike.”

Bianco expects the Fed to raise 75 basis points on Wednesday, which is in line with Wall Street’s estimate. He also predicts an additional 75 basis points increase at the next meeting in July.

“We can raise interest rates enough, we can destroy the economy, we can drop demand from the cliffs, inflation get off. Well, that’s not the way you or I want, “Bianco said.

He argues that the Fed needs to hit the economy seriously in order to set back its tightening policy.He warns that inflation is affecting every corner of the economy. Virtually all financial assets are vulnerable to sudden losses.. According to Bianco, the odds are against soft landings and even soft landings.

His exception is commodities that are placed to overcome inflation. However, Bianco warns that there are also serious risks.

“You haven’t fallen into demand collapse yet, so I think the product will continue to rise until you do,” he said. “But the warning I give people about commodities is that they have cryptographic level volatility.”

For those who are less tolerant of risk, Bianco believes that government-guaranteed money market accounts should look more attractive. Based on a 75 basis point increase, he sees a 1.5% jump within two weeks. According to the latest weekly institutional survey on Bankrate.com, the current national average rate is 0.08% for money market accounts.

It will rarely catch up with inflation. However, Bianco believes that investors have few options.

“Currently, everything is a one-way street in the wrong direction,” Bianco said.

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Inflation and the Fed are causing a one-way trip to market misery: Jim Bianco

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