ASX 200 to fall again today as the Fed’s threat of ‘higher for longer’ interest rates has soured market sentiment. US faces another looming shutdown as parties square off about rising gov debt.
The same indicators which would’ve warned you about 2021’s inflationary burst are now warning of the opposite — deflation. But should you listen this time?
The economic dynamics of China are different from the US, but no more encouraging. It’s helpful to begin with a quick recap of Chinese economic performance over the past three years.
After two years of steady selling pressure in the mid-, small- and microcap space, I reckon we are entering the final capitulation phase where punch drunk investors sell stocks at any price just to get out and end the pain. Check out the Closing Bell video above where I show you why I think the S&P 500 could be close to a 9% fall and where the ASX 200 would drop to if that happens… and explain why another wave down will take prices into a major buy zone.
All together now, interest rates are staying ‘higher for longer’. The US Fed is dead set on taming inflation and rising long-term yields show investors think advanced economies can bring about disinflation without recession. But the ‘higher for longer’ crowd is grossly underpricing the risks of a sharper economic slowdown. The cure for inflation always has unpleasant side effects. Just ask Milton Friedman.
ASX 200 ends flat following morning sell-off as global markets bet rates will stay higher for longer. US bond yields rise to decade highs. Costa and News Corp feature.
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