‘We are going to go into a really fast recession.’
“Housing is starting to roll over,” he said. “Inventories have exploded.”
“There are layoffs in multiple industries, and the Fed is stuck,” he said, with a position of having to “hike [interest rates] until inflation rolls over.”
Before the Fed announced its decision, Novogratz speculated — accurately, it turned out — that the central bank would lift interest rates by 75 basis points and that the market would rally on that news. He also predicted that stocks will sell off in the coming days.
“They are hiking into the popping of a bubble,” Novogratz said, referencing the soaring price tags on luxury Swiss watches and other assets.
So far, the noted investor’s prediction has played out, with the Dow Jones Industrial Average DJIA, +1.00% rising more than 300 points, or 1%, after briefly running its gain to 600 points, after the Fed meeting broke up and a news conference hosted by Chairman Jerome Powell got under way.
Powell: Fed ‘not trying to induce a recession’ with interest rate hikes
“We’re not trying to induce a recession now, let’s be clear about that,” Powell told reporters after the policy-setting Federal Open Market Committee raised short term rates by 0.75%.
Powell said the Fed’s goal is to depress the rapid pace of inflation closer to its 2% target, all while preserving a “strong” labor market. Forecasts released by the Fed showed confidence in the central bank’s ability to hit both marks, although economists say the task will be tough.
Projections from the Fed published Wednesday showed the median official expects interest rates will rise to 3.4% by year-end, well above the 2.5% level that many Fed officials have described as “restrictive” for economic activity.
“[G]oing faster and deeper into restrictive territory implies a greater risk of a hard landing,” ING Economics wrote Wednesday afternoon.
A “hard landing” outcome would be the opposite of forecasts from the Fed, and may look like a sharp spike in unemployment as the rapid pace of rate hikes halts economic activity.
“There’s a pathway here. It is not going to be easy,” Powell said Wednesday. He added that inflation remains the priority, noting that “clearly, people do not like inflation.”
this week in crypto has reminded me of the Long Term Capital Mgt. crisis in 1998,,,,
— Mike Novogratz (@novogratz) June 15, 2022
"We are going through what feels to be a little bit like a long term capital management moment in #crypto," says @Novogratz. "We've gotten to levels that I think should be close to the bottom." #bitcoin pic.twitter.com/ap1w5cBRwc
— Markets Today (@marketsday) June 14, 2022
Pending Home Sales Plunge To Lowest Level In Nearly A Decade—Worst Could Be Yet To Come