Low rates are hurting savers, pumping credit bubbles, exacerbating inequality, raising rents, and subsidizing trade tariff taxes. The Fed needs to stop subsidizing credit and start promoting real growth by raising, not cutting, rates; while congress must pass infrastructure spending legislation. This, plus the corporate tax stimulus and ending the tariff war, will promote real growth, like in the Clinton ‘90’s. Right now low rates are just encouraging stock buybacks, social and middle class stress, and debt.
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Trade wars shrink the pie. They shrink portfolios and employment too. Prepare for the 2020 downsizing.
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So how do we get the N.R.A. to adopt an anti-tariff position? That seems to be the only organization that GOP members of Congress care about.
9
“Buy low, sell high”.
But if prices are high, crash the economy so you can pick up real property (like homes, farms, or whole countries) on the cheap.
11
The macroeconomic data are clear. We are headed for an economic downturn and possibly a recession, both in the U.S. and worldwide. We are nearing the end of the economic expansion that began in June 2009.
If you are in debt, pay off what you can. Curtail discretionary spending, and make sure you have savings in an emergency fund.
If you are an investor, invest accordingly.
I am not an alarmist. The next eventual recession is likely to be a garden variety recession, not a repeat of the 2008 Global Financial Crisis. But it will still be economically painful, and prudence and preparation are warranted at this time.
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If the tarriffs are cancelled recession will be avoided. Most earnings have been quite strong this quarter, yet many value stocks are trading at trough level multiples, already pricing in recession. Look at how many energy named appear to be circling the drain. If the trade war is ended, interest rates will rightly go up and the few growth stocks goosing the market they are still now trading at sky high multiples will tank, but you will see the majority of value stocks rally significantly, and there would be no recession.
@Arblot
As far as the business cycle and stocks go, I see things differently. S&P 500 earnings are flat for Q2. Meanwhile, the unemployment rate is bottoming, and the yield curve is flattening and inverting, both signs of the end of an economic expansion.
These late cycle conditions would be present regardless of the tariffs and trade wars. Although they are not helping.
2
all part of the .01%'s plan to turn us all into indentured servants.
Now, even if you have managed to save a few dollars, the Fed will make sure you cannot earn any interest on it.
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Of course the big banks want rates to fall further: as a business model, it's hard to beat getting free money from the Fed and lending it out at interest. And they have the influence needed to generate graphs like this one, pressuring the Fed to give them what they want. The system is being gamed, and the rest of us are the losers without even playing.
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@JL Williams -- While as a saver, I prefer higher interest rates, your premise is inaccurate -- banks make more money when interest rates rise. See https://www.investopedia.com/ask/answers/041015/how-do-interest-rate-changes-affect-profitability-banking-sector.asp
8
The Federal Reserve is fighting a losing battle trying to bail Trump out of his disastrous trade policy. Powell is on a slippery slope; he will run out of ammunition before Trump runs out of tariffs. He needs to push back on Trump, publicly if necessary.
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The Fed's monetary policy cannot fix Trump's trade war centric fiscal policy. Don't take my words, Peter Boockvar and Mark Zandi, both (traditional) Republican leaning professionals, said the same thing.
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“A yield curve inversion occurs when long-term bond yields fall below yields on shorter-term government debt, and one has preceded every recession of the last 60 years.”
Taken in isolation, this doesn’t really tell you much. How about some statistics to make this more usable? For example, what percentage of the occurrences of a yield-curve inversion did *not* result in a recession? What ratio(s) between different yields are statistically meaningful, or predictive of a looming recession? A full covariance matrix approach is what I’m thinking (yes, I’m a mathematician). There’s a lot more that could be sussed out with the right data in hand.
9
@David Walker In the past 60 years this has happened 8 times. 1 time out of 8 it failed to predict a recession. so 7/8.
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