BEWARE! FED RATE HIKE COULD BURST BUBBLES KATHY FETTKE
Just weeks ago, the GDP
was closer to the central
banks rate hike comfort
zone, at 2.3%. It also
increased to 3.4% briefly
last month after positive
news about manufacturing
and construction spending.
But when disappointing
data on retail sales and
consumer prices came out
a few days ago, the Atlanta
Fed lowered its estimate to
the .8% level.
Roberts says that charts show a rate hike at a time like this could actually push us into another recession. He
told Market Watch that raising interest rates from ultra low levels at a time of slow economic growth could
impact spending and that charts show this type of situation has lead to recessions in the past within three to
nine months.
Nobel Prizewinning economist Robert Schiller is also warning people that Wall Street exuberance has gone
overboard. He told Bloomberg that traders are captivated by President Trump’s bold plans to slash regulations,
cut taxes, and “turbocharge” the economy with an infrastructure buildingboom.
He warns that when situations like this have happened in the past, it hasn’t ended well for the investors. Think
dotcom bust and housing meltdown. Both experienced sharp drops in the stock market.
Schiller says investors are shoveling money into the market with the hope that President Trump will make good
on his campaign promises. But they are also ignoring the enormous amount of uncertainty associated with
getting those new policies through Congress and the legal system.
The Trump Administration is proposing some extreme budget cuts that may not sit well with some of his own
constituents. A preliminary budget was introduced that slashes $54 billion from most federal agencies including
the EPA, HUD, and Health & Human Services. That money will then be spent on defense. There’s also the
affect of the Obamacare repeal. Depending on how many people lost their healthcare coverage, there could be
a lot of unhappy voters. And if this political turmoil jostles the stock market, we could see a reversal that could
happen quickly, and without mercy.