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December 15, 2021 | Financial Conditions Tightening into Consumer-Led Slowdown

Danielle Park

Portfolio Manager and President of Venable Park Investment Counsel (www.venablepark.com) Ms Park is a financial analyst, attorney, finance author and regular guest on North American media. She is also the author of the best-selling myth-busting book "Juggling Dynamite: An insider's wisdom on money management, markets and wealth that lasts," and a popular daily financial blog: www.jugglingdynamite.com

Today, Fed chair Powell will try to appease political pressure to “do something!” about inflation caused by supply-side shocks (which are already resolving themselves) and asset markets loco on the irrational belief that central banks won’t let asset bubbles burst.  Sure thing!  Of course, the policy mistakes were already made in not tightening financial conditions appropriately during the expansionary phases and speculative manias of the last two decades.

Now, as expectations for Fed tightening accelerate, the risk-trade is tumbling (stocks, corporate debt, commodities, cryptocurrencies, and yes, even real estate is in this group). At the same time, Treasury bonds keep gaining on slower and slower growth prospects for 2022.  A new sheriff’s in town, and it’s called mean-reversion.  Global liquidity is retreating amid a consumer-led economic slowdown with market participants never more long or leveraged.  Perfect storm indeed.

The Economic Cycle Research Institute’s Lakshman Achuthan warns consumer spending is in a cyclical slowdown, and it will weigh on holiday sales. Here is a direct video link.

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December 15th, 2021

Posted In: Juggling Dynamite

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