During the first few trading days of March 2023, we watched the stock market falter, housing demand cool, the 10 Year Treasury Bond rises to a 4% yield, and the 30-year fixed mortgage increase above 7%.
This all came after several hotter-than-expected inflation reports hit investor confidence.
The Federal Reserve has also cut back on its interest rate hikes, going from an increase of 75 basis points to 50 basis points, down to just a 25 basis point increase. Those reduced rate hike increases were due to inflation reports trending in the right direction.
However, reports coming out now show inflation has not yet been tamed after the hikes were slowed. And this is having both big and small investors and some Federal Reserve members calling for faster rate hikes in the future.
David Einhorn, who had a 36% return in his hedge fund in 2022, recently said investors should still be bearish on stocks and bullish on inflation in 2023. Einhorn was short US equities in 2022 and performed very well for his hedge fund investors.
Former Pimco Chief Executive Officer Mohamed A. El-Erian recently wrote in Bloomberg that he favors a 50 basis point rate hike at the coming Fed Meeting. He further noted that three Fed Members have publicly announced their wiliness to increase rate hikes by 50 basis points at coming meetings, despite all agreeing to raise rates by just 25 basis points at the Feb 1st meeting.
Federal Reserve member James Bullard is one of those three Fed members who have come out and announced he favors faster rate hikes in the future. Bullard believes inflation can be beaten in 2023, but only with aggressive rate hikes until it begins to come down. His concern is that inflation doesn’t come down but re-accelerates, and we are forced to relive the 1970s.
With the next Federal Reserve meeting just a few weeks away, now is the time to start planning your portfolio. There is a good possibility that even if rates aren’t increased aggressively at the March meeting, they will be increased multiple times over the coming meetings. Continue reading "Watch The Inflation Numbers"