The Fed raised its benchmark rate by 75 basis points on Wednesday, a move that was accompanied by hawkish rhetoric from Fed Chairman Jerome Powell. As the Fed continues to raise rates and weaken demand, it will “break” markets, said Lobo Tiggre, editor of TheIndependentSpeculator.com.
“I would be very surprised if we go too far in 2023 before there are any real signs of pain,” he said. “I think we are going to consider massive layoffs. Those really haven’t arrived yet.
He added that “there will be rallies on a downtrend that I think will last for years.”
Tiggre spoke with David Lin, presenter and producer at Kitco News.
Market reaction to Fed rate hike
After the Fed announced its rate hike on Wednesday, the S&P 500 fell 2.5%, wiping billions in value.
“The surprise was [in Powell’s] language,” Tiggre said. “That’s why the markets went vertical at this time.”
Tiggre said Powell would rather overdo it on inflation, which stood at 8.2% in September, than look weak.
“He quickly reassured his audience that… [The Fed] has the tools to step in and support the economy if it goes too far,” Tiggre said. “In other words, they’re planning to go too far…The Fed is absolutely going to smash this economy.”
However, Tiggre also said the Fed will struggle to bring inflation down and will require “a lot more pain,” which could lead to job losses.
Inflation and government policy
Tiggre warned there could be more inflation as the government increases spending to counter a weak economy.
“If Washington’s response is… let’s send them stimulus checks, you could see a lot more inflation with this recession,” he said. “You could see commodity prices go up.
President Joe Biden and other politicians have blamed recent price hikes on Russian President Vladimir Putin’s war in Ukraine. However, Tiggre said the inflation cannot be solely attributed to the Russian leader.
“It ignores the fact of the COVID-19 shutdowns and resulting interventions, and what that did to inflation before the war started,” he explained. “The US administration talks about Putin’s oil tax…but [oil prices] were high before the start of the war.
Musk’s Twitter projects
Elon Musk recently bought Twitter and plans to monetize the microblogging app by charging verified users $8 a month.
Tiggre welcomes this change.
“I have to side with Musk on this one,” he said. “Musk’s proposal is like a toll lane on a highway…it’s congestion pricing…I’d be happy to pay $8 and have this account verified, which might help me fight scammers and imposters.”
For Tiggre’s thoughts on mining stocks, watch the video above
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