SUZ - Would A Bear Market Affect Fed Interest Rate Hikes?
- The Fed often seems to consider the market a leading indicator of the economy, and therefore it factors into their decisions.
- If the market turns sour, likely due to a combination of factors ultimately leading back to inflation, Fed rate hikes will likely happen with more conviction than expected.
- We think these Fed hikes will immediately hurt the markets, as any rate increases almost always do, and will hurt them even more if they have little medium-term effect.
- We maintain that inflation is probably mostly supply side related, and that capacity expansions will be the thing that releases the economy from inflationary pressures.
- Fed rate hikes, especially if they fail to curb inflation, may reverse, and in the meantime might create a nice buying opportunity.
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Would A Bear Market Affect Fed Interest Rate Hikes?