Author: Gold Macro Page 13 of 18

Nothing lifts the animal spirits of markets quite like the smell of fresh rounds of central money printing, to go with the central banks that never stopped.

The US Fed’s reversal in late January, (combined with intense early January jawboning from US Treasury Secretary and President to buy all the things) was sudden, and stunned markets for the pace of the reversal.

In fact, Jerome Powell, The US Fed Chair, assured markets in early December that they would be proceeding with further tightening and rate hikes due to the “awesome” nature of the economy.

Then, in late January, they couldn’t do it anymore. WOW.

Investors only seeing the “good” this bad news has had on stock markets really need to look again, specifically at the “why”.

In fact, we believe there are a number of “whys” requiring consideration for investors in 2019, 

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Best of the festive season to all, we’re hoping it’s a safe one for you.

Before we get into the content of our last note for the year, we’d like to present the following chart from the irrepressible team at visualcapitalist.com   

Just food for thought, leading into 2019.

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The old line, “recession doesn’t kick in until after the last rate rise” certainly doesn’t look like it will apply to Australia this time round.

Indigestion from too much debt makes a rate rise in Australia so remote, it would take some type of unexpected hyperinflation to trigger.

The US Fed reserve’s determination to continue to raise rates until something breaks makes it interesting to ponder why the US Fed doesn’t consider its countries own indebtedness in the same vain.

In fact, the whole debt situation leads one to ponder if the GFC was a garden variety correction rather than (in the words of John Mauldin):

The Great Depression was a soul-searing, generational-impacting event. The events around 2008, bad as they were, had nowhere near that effect.

In hindsight, low and zero interest rates of the last 9 years just encouraged all entities that didn’t have “enough” debt to take on as much as they can so that the next event will be more like the soul searing, generational impacting reset that has been a regular feature of economic history.

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