May 5, 2022
Yesterday, the Federal Reserve (Fed) announced an expected 1/2 point increase in interest rates, the first of several possible monthly 50 basis point increases, over the coming months. In addition, the Fed will start reducing its $9 Trillion Dollar balance sheet, with $30 Billion/month of sales of Mortgage Backed and Treasury Bonds.
Neither of these actions will be positive for stock, bond and other assets classes as the Fed attempts to reign in inflation forces that have built up over the past year.
The stock market staged a 900 point “relief” rally that the Fed is not contemplating 75 basis points increases in Federal Funds rates, “at the present time.”
The Chinese Market continues to look like it is under stress from the slowdown caused by Covid-19 lockdowns, and the inability of many Chinese property companies to generate sufficient cash flows to meet debt obligations.