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Date Posted: 13:35:00 1/18/23 Wed
Author: Jasper
Subject: From Michael Pento

.
Now, please understand I’m not saying the Fed will never pivot back to QE and ZIRP. It will indeed. However, that decision will come much later and with much more trepidation than what Wall Street is expecting. It will probably come after one of the following conditions occurs: the credit markets freeze, shadow banks begin to file for bankruptcy, the major averages drop by 45-50% from their peak, core PCE inflation falls to 2%, or we have two back-to-back negative non-farm payroll reports. Until then, it is the notion of a perpetual fed put that Powell needs to end.

Therefore, there should be a 5% Fed Funds Rate by March; and then the FOMC will seek to hold it there for as long as possible–some members have stated it will remain there well into 2024. That means rates will have been raised by 500 bps in one year after being below 1% for ten of the last fourteen years. Such a situation has never happened before…nothing even close. These lagged monetary effects, along with massive QT, will hit the economy hard this year. The bottom line is this: the economy is now shrinking, and the Fed is still hiking rates and reducing the money supply. And, it will not be easing monetary policy any time soon, not with CPI at more than 3x the Fed’s target.

The reopening of China is providing yet another excuse for a short-term bounce in the market. Nevertheless, the joke is on the perma-bulls, who believe this is now a green light for a new bull market to begin, even though valuations are absurdly high and earnings are about to suffer a significant decline.

https://pentoport.com/powell-to-break-wall-streets-pavlovian-response-to-recession/

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