The Great Recalibration of 2022
- Let things go and inflation could burn on through the Dollar.
- Call a halt to things and watch gravity work its wicked will.
"The Federal Reserve provided multiple indications Wednesday that its run of ultra-easy policy since the beginning of the COVID pandemic is coming to a close..."The Fed will be buying $60 billion of bonds each month starting January, half the level prior to the November taper and $30 billion less than it had been buying in December. The Fed was tapering by $15 billion a month in November, doubled that in December, then will accelerate the reduction further come 2022."After that wraps up, in late winter or early spring, the central bank expects to start raising interest rates, which were held steady at this week's meeting. Projections released Wednesday indicate that Fed officials see as many as three rate hikes coming in 2022, with two in the following year and two more in 2024."
"Now I have seen how high rates are going and how fast it's going to happen. The uncertainty is removed from the market. From an equity perspective, now they just have to focus on earnings, margins and growth. It's kind of a sigh of relief to the equities market who thought it might be much more aggressive. It's kind of what we were thinking anyway."
"The equity market is forecast to see a massive drop-off in earnings growth in 2022 while trading at a historical high P/E, all as the Fed is pulling back on QE, which is already tightening financial conditions. It is a recipe that continues to be a disaster-like scenario for stocks unfolding in slow motion."