By Nomi Prins, Editor, Inside Wall Street with Nomi Prins If you have money invested in stocks, you may have had some sleepless nights over the last few months. Yesterday, the S&P 500 officially entered bear market territory. At writing, it’s down 21% year-to-date. The Dow is down 16%. And the tech-heavy Nasdaq is down 29%. Violent swings several percentage points a day in either direction have been all too common. On top of that, we’ve seen the highest inflation readings in four decades. And to combat that, the Federal Reserve is raising interest rates. Today, it announced a 0.75% hike… on top of May’s 0.50% hike and March’s 0.25% hike. Which has been spooking the market these past few months… So your day-to-day spending is up, while your investment portfolio is likely down. That’s a double-whammy for your money. And no doubt, you’re wondering what to do… So today, I want to explain what’s going on in the markets. I’ll show you why you shouldn’t join the mass exodus from stocks… And why what’s happening is actually creating opportunity for those who know where to look. Recommended Link | Billionaires preparing for a possible recession, Have you? Jamie Dimon, CEO of JPMorgan Chase, recently issued a warning telling everyone there’s an economic hurricane coming. He’s not the only banker who’s issuing warnings. Wells Fargo’s CEO recently said that “it’s going to be hard to avoid some kind of recession.” And now, former Goldman Sachs executive Nomi Prins is sounding the alarm about an imminent $4 trillion market shock. This is so critical that she’s hosting a special online strategy session tonight, at 8 PM ET. (By clicking the link, your email address will automatically be added to Nomi’s RSVP list.) |
| -- |
Markets Hate Uncertainty Basically, investors have been caught up in a storm of fear. It’s mostly over the Fed’s next moves. Markets hate uncertainty. That’s why they’ve been down so much recently. It’s also why they rallied on the back of the Fed’s announcement today. The thing is, the Fed’s current policy will continue to provoke this sort of uncertainty in the near term. Ultimately, the markets want to know whether the Fed will embark on a longer-term path of aggressively raising rates… and when it will stop. And whether it will significantly reduce the size of its $9 trillion book of assets. Yes, there are other issues weighing on the market’s mind, such as inflation, the war in Ukraine, more supply chain disruptions, and potential recession. But the market is most concerned about the Fed. See, the Fed took a “wait and see” approach to rising inflation in 2021, rather than actually doing something about it while it could. Only when inflation had exploded – higher than it had in over four decades – did the Fed finally kick into gear… sort of. In March, it raised interest rates by 0.25%. In May, it raised them by 0.50%. That was its biggest rate hike in 22 years. And today, it raised rates by another 0.75%. That’s its biggest one-time hike in 28 years. Now, that might seem like a really big deal. But as I said live on Fox Business earlier today, it isn’t. Nomi gives her take on the Fed’s rate hikes on Fox Business That’s because before that, interest rates were at zero, more or less. So, including today’s announcement, they’re now in the range between 1.5% and 1.75%. The Fed expects to end the year at around 3.4%. So it’s saying there are several rate hikes yet to come… But some readers may remember when interest rates were around 20% – in the Fed’s attempt to fight the double-digit inflation of the 1980s. So the cost of money is still hovering around historically cheap levels. And the Fed’s book of assets is still nearly $9 trillion. You can see that – and the massive hike courtesy of its quantitative easing (QE) – in the chart below. Now, the Fed has been talking about reducing its balance sheet of late. But don’t be fooled. It’s not actively selling any of its $9 trillion worth of assets at this point. Instead, it’s letting bonds on its books mature naturally, or “roll off.” It’s not replacing them with new ones. That roll-off could result in up to $95 billion per month of quantitative tightening (QT) by August. At that rate, it would take four years for the Fed’s book to get down to pre-pandemic levels. A lot can happen in four years. This brings me to something important I want to talk to you about. Recommended Link | (By clicking the link, your email address will automatically be added to Nomi’s RSVP list.) | -- |
The Fed’s Dilemma The first rule about the Fed is to watch what it does, not what it says. Now, every so often, those two things will be the same. But what the Fed does is key. The Fed ignored inflation building in the real world for a year before it did anything at all on rates. Before that, it ignored the inflation of assets in the financial realm for many years. This is all part of what I call The Great Distortion. It’s a permanent disconnect between the markets and the real economy. And it happened because the Fed and other central banks fabricated trillions of dollars. That money has flowed into the markets instead of the real economy. And while the economy is facing real inflation in things from fuel to food… the Fed can’t actually do anything about that. As I said on Fox, the Fed can’t plow wheat farms or produce oil wells – even if it tries to fight inflation by raising rates. You see, while the Fed’s money was flowing in the wake of the pandemic… The economy was suffering from closures, supply shocks, and ongoing supply chain disruptions. And from real inflation in everything from gas to food. It still is. But the Fed is stuck in a Catch-22 of its own making. It adopted an epically cheap monetary policy in 2008. And now, it can’t back down. (I’m holding a special investment briefing with more on this tonight at 8 p.m. ET… Including what I believe the Fed will do next. So be sure to automatically save your spot here, if you haven’t yet.) Today, Fed leaders talk about being more aggressive with rate hikes (for example, 0.75% at a time) and the speed of QT going forward. But even if the Fed does go ahead with its plans to raise rates to 3.4% this year, the cost of money is still historically cheap. And a major portion of its epic money fabrication remains in play for Wall Street and for the markets. That’s why, at the end of the day, even with all the market volatility we’ve seen, markets will still have a cheap money supply. That provides them with this massive trampoline. And if history is any guide, they will bounce back even stronger from today’s volatility… Recommended Link | TONIGHT AT 8 PM ET: Nomi’s New Recession Warning 2022 has been a rough year. Many stocks are down by 50% or more… Gas prices are breaking records… And many economists are predicting a recession. This is all part of the permanent crisis former Goldman Sachs executive Nomi Prins calls “The Great Distortion.” But while everyone is talking about inflation and recession… Nomi believes there’s something much bigger on the horizon that nobody is talking about. It’s an event that’s guaranteed to happen in August. And she believes it will trigger a $4 trillion market shock that will catch most Americans by surprise. That’s why tonight, at 8 PM ET, she’s hosting a special strategy session to help you prepare for the rest of 2022. |
(By clicking the link, your email address will automatically be added to Nomi’s RSVP list.) | -- |
Cat and Mouse Game What’s going on in the markets is the equivalent of a toddler throwing a massive tantrum. We’ve seen it play out many times before. On December 16, 2015, the Fed raised interest rates by 0.25%. And it forecast four rate hikes for 2016. But the markets freaked out at even the possibility that money would get more expensive. They were fixated on zero percent interest rates. So the Fed stepped back. We got one rate hike – in December 2016. And in 2018, when Jerome Powell said interest rate hikes were on “automatic pilot,” the S&P 500 plunged 20%. The Fed swiftly softened its stance. It decreased rates three times in 2019. Although the Fed may talk tough initially, it always caves to market pressure in the end. I’m not saying it won’t keep raising rates in the short run. But in the long run, I don’t think it will do so as aggressively as the market fears. Now, it’s painful and disorienting. I know. This volatility around worrying about what the Fed does next is becoming a pattern. But there’s nothing the Fed can do – by raising rates or selling assets – to impact real inflation anyway. The Fed can’t create food. It can’t create oil. This year, it made a political decision aimed at taking pressure off itself for missing the inflation boat to begin with. It wanted to say, “Look, we did get it.” But the Fed knows that selling its assets too quickly would hurt the markets too much. And raising rates too high would make servicing U.S. and other dollar-denominated debt too expensive. It could cause a recession. Still, the markets are going to whipsaw every time someone from the Fed mentions “balance sheet runoffs” or interest rate hikes. But I have already been through so much market turmoil in my career… From the 1987 crash… to the dot-com crisis… to the financial crisis… to the first time the Fed stopped quantitative easing (QE) after the financial crisis… to the pandemic. So I know that this market turbulence will pass. I also know that, until it does, we should absolutely take advantage of it… Because as I saw during my 15 years on Wall Street… and my three decades in the markets… some of the best profit opportunities happen in crazy markets. In fact, when I worked on Wall Street, big banks paid me millions of dollars to develop systems to profit from difficult markets like these. And for the past two years, I’ve been developing a new strategy. We can use it to take advantage of The Great Distortion… no matter what action the Fed takes next… and whether the markets go up or down… To show you how, I’m hosting an urgent investment briefing tonight at 8 p.m. ET. To everyone who attends, I’ll even give away a free recommendation that could double your money. So if you are at all worried about the direction of the markets, or what the Fed will do next, make sure you join me tonight. Simply click here to automatically reserve your spot, and I’ll see you there. Regards, Nomi Prins Editor, Inside Wall Street with Nomi Prins P.S. The Fed’s latest interest rate hike – 0.75% – was well signposted. So it’s safe to say the markets had already priced it in. But no doubt, we will see plenty more volatility around future rate announcements this year. My new profit strategy is a way for you to play whatever market volatility comes as a result… to your advantage. If you want to know more, click here to automatically save your spot at my urgent briefing tonight. Attendance is free… and I’ll even give away a recommendation – no strings attached – so you have a chance to start making money right away. Like what you’re reading? Send your thoughts to feedback@rogueeconomics.com. Get Instant Access Click to read these free reports and automatically sign up for daily research. How to Earn Free Bitcoin The Ultimate Guide to Taking Back Your Privacy The Trader’s Guide to Technical Analysis |