The US Federal Reserve is, in my opinion, playing with fire
The COVID virus event raised the global debt level by more than $19.5 trillion dollars (Source: Bloomberg). A flurry of effort to save the global economy has caused a massive jump in global debt levels – pushing global debt above 356% of GDP levels (source: Axios).
Why is this so important right now? Because the US Federal Reserve is talking about trying to bring interest rates and Fed decision-making down to near-normal levels. In my opinion, it was a mistake by Alan Greenspan in 2006-07. The idea that we can raise rates to “near normal levels” at any time when we have increased excessive debt levels around the world is, in my opinion, unsuccessful thinking and ignorant.
The US Federal Reserve is stuck and almost back in a corner. I believe that any rate hike above 1.00 by the US Fed before the end of 2023 will significantly disrupt the global speculative bubble. Any attempt to move rates to levels near or above 2.00 would represent an increase of approximately +2000% in less than 12 to 24 months. If you want to see a blow to global markets where global debt to GDP is closing in on 400%, try raising the FFR to over 2000% in a short period of time. This is what I call “playing with fire”.
2022 and 2023 will be filled with significant market trends and increased volatility. Right now, traders and investors need to understand that global markets are increasingly attempting to move away from the speculative/growth phase as the US Federal Reserve attempts to telegraph future rate hikes. So it’s time to think about how to prepare for the unknown and protect your capital more efficiently.
Growth sectors and US major indexes may continue to move higher for the next 30 to 60+ days, but my research shows that Q2:2022, representing a “change in thinking” related to the Fed shift at the end of 2022 Can do. We are starting to see the market move away from the speculative bubble-type trend we saw in 2020 and early 2021. Keep your eyes peeled and learn how to prepare for the big trends in the next 3+ years. The Fed is playing with fire right now. One wrong move and a massive price correction/reversal can start in the market.
Finding the Right Trading Strategies
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Learn how I use specific tools to help me understand the price cycle, set-up and price target levels in different sectors to identify strategic entry and exit points for trades. Over the next 12 to 24+ months, I expect very large price movements in the US stock market and other asset classes around the world. I believe the markets are starting to move away from the sustained central bank support rally phase and may initiate a revaluation phase as global traders attempt to identify the next big trend. Precious metals will start acting as a proper hedge as caution and worry starts pushing traders/investors into metals.
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Founder and Chief Market Strategist of The Technical Traders Ltd.