Since WWII there have been 14 Fed rate hiking cycles.
11 out of 14 have resulted in recession (two consecutive quarters of negative GDP).
All hiking cycles that invert the curve have led to recessions (and lower rates) within 1 to 3 years.
The big concern is prior to even the first Fed rate hike in April this year, the yield curve had already inverted and Q1 GDP was negative.
Recessions kill inflation because of the negative economic growth that defines them.
EVERYTIME there is a recession, Treasury Bonds rally (lower rates).
Either the Fed is on track to navigate a soft landing (no recession) or bond yields (and inflation) have peaked.
After this week’s stock sell-off, the market is not showing a lot of confidence in the Fed’s emergency landing skills.
History proves Central Bankers are great at creating bubbles and causing recessions.
They are so good at it you can’t help but wonder if that’s actually their intention.
Regardless their true motives, raising rates into a contracting economy, one that appears to be just a few months from a confirmed recession, is definitely not something for the faint of heart.
I hope you brought a parachute…
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