In my view the Fed is walking the US off a cliff, and it will take the world with them.
They are using very lagging indicators like CPI as justification, but the US is weak and getting much weaker.
Trying to quickly crush temporary supply side caused inflation by going nuclear on demand, is a giant policy error IMO.
Good news is that we will likely have a window between when the Fed pauses (or pivots) and when earnings are crushed, and in turn tank the markets. Hopefully we have 4-6 months before earnings plummet, and my money is on a Fed pause before then.
This should see a violent rally, and commodities will outperform. Mid June to mid August was a taste of this, and it was based on the bond market reacting to a slight change in rhetoric from Powell. He and many of the reserve governors come out and walk it back by talking tough, (very effectively I might add), so here we are. Bond markets almost fully pricing in 4% fed funds rate, despite the state of the US economy, (as shown by a leading indicator like Fedex's revised guidance).
Money pouring out of US treasuries will cause the dollar to drop, and with that, equities, commodities and particularly gold will go on a run. Dollar strength has also been suppressing Cu, so the supply/low inventories could cause it to go parabolic if the $ rolling over takes the brakes off.
Once the demand for commodities is squashed by a global downturn, Australia will not escape. The leverage in our property markets will amplify it for us. I will be battening down the hatches in my business next year, and try to ride it out.
Now big question, how much more short term pain are we in for before a change from the Fed? Powell has played chicken with a global crash for much longer than I thought he would, but he does not yet realise it's too late to get out of the way. So another week? or 6 weeks? Entirely possible, but I bloody hope not.
I'm still all in on SPQ, and it seems we are primed to benefit in the short to medium term.
GLTAH, and most certainly not advice, just ramblings.
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