Enjoy your life, no matter the economic situation. If you do, then you’ll always be winning. The key is to recognize reality and take appropriate action.
The Fed hiked another 50 basis points to 4.25% – 4.5% on December 14, 2022. Despite two consecutive lower-than-expected monthly CPI numbers, the Fed indicated it will hike to a terminal rate of 5.125%. Most investors were hoping the Fed would stop at 5%.
Meanwhile, the 10-year bond yield is only at 3.45%, meaning there is a huge yield curve inversion. It’s the largest inversion in over 40 years. The bond market is screaming for the Fed to stop hiking, but it just won’t listen.
As a result, the United States will inevitably go into a recession again in 2023 thanks to the Fed’s overly aggressive tightening. Over a million people will lose their jobs, banks will go bust, and trillions of wealth will evaporate. Instead of expecting inflation in 2023, we should start worrying about deflation again.
All the good done by governments to support billions of people during the pandemic will have been for nothing. Can you imagine struggling through a pandemic for three years, finally coming up for air only to be run over by a speedboat driven by a rich central banker?
When you are worth ~$100 million, as Fed Chair Jerome Powell most certainly is, you may not care as much about the middle class as you do about your legacy. Instead, you want the history books to emphasize how you were tough on inflation and gloss over the human suffering caused by your decisions.