Rate Hikes Without End

The world does not need another take on Jackson Hole. But here we go.

The reason the market crapped out is because we have rate hikes without end. The Fed keeps moving the goalposts. First, we thought it would stop at 3.5%, then we thought it would stop at 4%, now… 4.5%. Five freaking percent? Where does it stop?

It stops when the Fed breaks something. Or at least, it seems that way.

If Chairman Powell had given us some clue, some hint that the Fed was getting close to the end of its rate hike campaign, then the market would have responded positively. But we have rate hikes without end. Down the elevator shaft we go.

This gets back to what I’ve said about the Fed all along—it always pursues the path of least embarrassment. Fed members were wrong about inflation initially, they were embarrassed, and they’re not going to make that mistake again. Instead, they’re going to make another type of mistake. They’re not going to make the same mistake two times in a row. That would be stupid. So, they’ll overdo it, which is exactly what is happening.

What does this mean for stocks? Heavy sledding. I think it’s unlikely we’ll make new lows, and equally unlikely we’ll come anywhere close to the highs. It’s going to suck for a while.

You see, this is why I’m not Mike Wilson, the CIO at Morgan Stanley. He would never say the stock market is going to suck for a while. But it will.