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    Off The Cuff: Bad Assumptions = Bad Outcomes

    Both the market & the Fed are making dangerous assumptions
    by Adam Taggart

    Thursday, February 28, 2019, 8:20 AM

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In this week’s Off The Cuff podcast, Chris and Wolf Richter discuss:

  • The Market Is Making Some Dangerous Assumptions
    • Right now it’s confident the Fed won’t hike this year. But will that be the case?
  • A Rate Surprise Would Shock The Markets
    • But the massive rebound seen since Jan supports hiking
  • Higher Rates Would Help The Fed Address The Coming Recession
    • Yet another reason rates can still go up
  • But There’s No Guarantee The Fed Can Ride To The Rescue
    • One day its stimulus will stop working, no matter how large

There’s been a lot of releases from the Federal Reserve lately which Chris and Wolf deconstruct here. Wolf is of the mind that the markets are interpreting the Fed’s recent dovish moves as complete capitulation. He’s not so sure about that — he thinks the Fed will raise rates if given the opportunity. And the massive market recovery since the start of the year is giving it more and more validation for further hikes. So Wolf warns that the market could be in for a nasty surprise should the Fed hike later this year.

But he also warns that the Fed is guilty of making some shaky assumptions of its own. Here he explains why its stimulus playbook may not work as expected when the next recession arrives:

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