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 September 26, 2022

Investors predict 'hard landing' after Fed's latest massive rate hike

There seems to be little doubt that the U.S. economy is squarely in recession territory, as much as the Biden administration wants to deny it.

According to the Washington Examiner, top investors -- who usually know more about the markets and the economy than politicians -- are bracing for tough times ahead. The warnings come in the wake of August's 8.3% inflation news, which was much higher than expected, combined with the Fed hiking rates another 75 basis points this week.

The term used now by investors, a "hard landing," is different than predictions from not long ago, when the same investors gave a "soft landing" a fair chance of happening as the Fed raised rates.

"I think it's finally sinking in across all kinds of investors and bond traders and businesses — it's finally sinking in that, yeah, this is not going to be a soft landing. ... We're going to incur a little pain, and I think the real uncertainty now is for how long," said Victor Claar, an economics professor at Florida Gulf Coast University.

The Examiner noted:

That immediately caused markets to crater amid anticipation that the Fed would have to bruise the economy even more in order to tame prices. The Dow Jones Industrial Average shed more than 1,200 points the day the report came out, the seventh biggest decline in points in U.S. history. The Nasdaq composite plunged by more than 5%, and the S&P 500 had about 4.3% of its value erased last Tuesday.

"The market has been transitioning clearly and quickly from worries over inflation to concerns over the aggressive Federal Reserve campaign," said Quincy Krosby of LPL Financial. "You see bond yields rising to levels we haven't seen in years — it's changing the mindset to how does the Fed get to price stability without something breaking."

Nearly all major banks and investment firms are warning of tough times ahead, but the Biden administration continues to spin the horrible news as if it's no big deal at all.

Something tells us that the American people will remind them that it's a big deal come the November midterms.

Written By:
Ryan Ledendecker

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