The Fed raised its benchmark rate on Wednesday by 75 bps, a move that was accompanied by hawkish rhetoric from Fed Chairman Jerome Powell. As the Fed continues to raise rates and weaken demand, this will “break” markets, said Lobo Tiggre, editor of TheIndependentSpeculator.com.
“I’ll be very surprised if we get too far into 2023 before there are real signs of pain,” he said. “I think we’re going to be looking at large layoffs. Those really haven’t come yet.”
He added that, “there will be rallies on a downward trend that I think will endure for years.”
Tiggre spoke with David Lin, Anchor and Producer at Kitco News.
Market Reaction to Fed Rate Hike
After the Fed announced its rate hike on Wednesday, the S&P 500 fell by 2.5 percent, shaving off billions in value.
“The surprise was [in Powell’s] language,” said Tiggre. “That’s why the markets went vertical at that time.”
Tiggre claimed that Powell would rather do “too much” about inflation, which stands at 8.2 percent in September, than seem weak.
“He quickly reassured his audience that… [The Fed] has the tools to step in and support the economy if it goes too far,” said Tiggre. “In other words, they’re planning to go too far… The Fed is absolutely going to break this economy.”
However, Tiggre also said that the Fed will struggle to bring down inflation, and that it will require “a lot more pain,” which could result in job losses.
Inflation and Government Policy
Tiggre warned that there could be more inflation, as the government increases spending to counteract a weak economy.
“If the response from Washington is… let’s send them stimi checks, you could see a great deal more inflation with this recession,” he said. “You could see prices of commodities go up.
President Joe Biden and other politicians have blamed recent price increases on Russian President Vladimir Putin’s war in Ukraine. However, Tiggre said that inflation cannot be solely pinned on the Russian leader.
“This ignores the fact of the COVID-19 shutdowns and the interventions as a result of that, and what that was doing to inflation before the war started,” he explained. “The administration in the U.S. is talking about Putin’s oil tax… but [oil prices] were high before the war started.”
Musk’s Twitter plans
Elon Musk recently purchased Twitter, and plans to monetize the microblogging app by charging $8 per month for verified users.
Tiggre welcomes this change.
“I have got to side with Musk on this one,” he said. “Musk’s proposal is like a toll lane on a highway… it’s congestion pricing… I’d be happy to pay $8 and have that verified account, which might help me fight off the scammers and imposters out there.”
To find out Tiggre’s thoughts on mining stocks, watch the video above
Follow David Lin on Twitter: @davidlin_TV
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