Since my post the market climbed a little higher before succumbing to a sharp drop which is being blamed primarily on the sharp rise in long term interest rates. Although I describe the move up in rates as "sharp", the 10 year yielding 3.2% is still quite low historically speaking, however, corporations and individuals have been been used to low rates for quite some time and so any notable increase in rates will have an impact. You also have to look at the flips side of higher rates which is that it's a benefit to lenders but overall history would suggest it's a net negative for the market when there's been a prolonged rise like this. I believe the current rise in rates could be digested by the economy and not derail it IF the fed can back off and signal that they are done hiking for the time being. Higher rates appear to be taking a bite into the economy as per the continued slowdown in housing which I warned about last post. Just look at the home builder sector as per XHB..,shambles. Trump has been critical of the Fed and more importantly the market has been critical. It appears that the Fed's motto is this "we'll keep raising rates until something breaks. " which is a fucking stupid philosophy. As Cramer recently said, the Fed is willing to burn down the village so that it can save it later. The Fed should be proactive and anticipatory. Rates have gone up a considerable amount since 2016. Yes, they are still historically low, but you need to give the economy time to adjust. And there is no sign of run away inflation either. The internet and globalization has really put downward pressure on inflation and people have constantly underestimated this impact.
Cramer has been sounding the alarm bells hoping that his message will be heard by the fed. He's got enough pull for them to hear it, but will they change their tone? I think they will. I think ultimately memories of 2008 will make them and I think that the lower the markets go in the short term, the better off it they will be in the long term because a weak stock market will give the Fed a nice hard slap to the face to stop hiking.
As I predicted before, I don't think the Fed will hike in December or if they do they may signal it will be the last one for a while unless they turn out to be blind, stubborn numbskulls...which maybe they will turn out to be.
