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The Fed’s Playing a DANGEROUS Game: Here’s How Ugly Things Could Get

June 17, 2022  |  Steven Place
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He did it. The madman actually did it.

This week, the Fed hiked 75 basis points. 

That’s the first time this has happened since 1994. 

I know what they’re trying to do… inflation’s running hot, and they want to cool it down.

But it’s a tough call to make right now. I don’t think much of the inflation risk is on the demand side… 

Instead, I think it’s on the supply side.

Doesn’t matter what the Fed funds rate is — if we can’t refine oil or if there’s a hot war between two of the largest wheat producers in the world, prices will go up.

The Fed is playing a game of brinkmanship, thinking they can temper inflationary expectations without absolutely crushing the market.

But let’s consider a possibility here…

What if the Fed manages to reach a 3% rate by the end of the year — which is what we’re pricing in — but the supply chain remains broken?

Answer:

Massive demand destruction and higher unemployment, while the energy markets are still bid.

That means we could see more people out of work who can’t afford the energy-driven cost of living increases.

That’s how it can get ugly. 

Not “Oh no, my stocks are down!” kind of ugly... 

More like a major US city falling into anarchy as access to food dries up.

For the past year, I’ve argued that global economic movement looks more like an EKG reading than a normal business cycle:

EKG

EKG

It’s the speed of it all that’s throwing the global economy in disarray.

I’ve got a solution, of course.

I’m going to armchair quarterback this one. I’m by no means an expert in geopolitics, but my network is…

And I can tell you the “thing that must not be said.”

The West needs to take the L on the current iteration of the Ukraine conflict. 

Let’s be real: The State Department got caught with its pants down, and unless we see a massive intervention in force, the Ukrainian government probably won’t gain any ground.

If the current Administration were smart, they’d offer a diplomatic solution as we head into late summer. Cut your losses, lick your wounds, and regroup. 

Germany and France are spooked enough to crank up defense spending, and NATO looks like it’s gaining a few extra members. 

So you can continue applying pressure to Russia and send in SOF to train Ukrainian insurgents, while Russia will be forced to spend excessive money and attention babysitting the two new “independent” regions.

The West needs to play the long game here because the short game leads to massive economic uncertainty that can destabilize entire regions.

Speaking of the short game, we as investors can play it — and at Precision Volume Alerts, that’s what we’ll use our Market Roadmap for.

Head here to learn more about this Roadmap.

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Steven Place
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