As the year of 2015 dwindled down to a slow close the markets sought the increased interest rate as a measure that insured financial stability as well as an economic recovery. This increase, with the promise to slowly increase rates over 2016, was a long-time waiting. Finally as financial traders and political economists released a sigh of relief as the doom days of endless QE come to a close, right?
Logically one must admit that the FED sure waited a while before being able to actually raise interest rates a historic .25% increase. Historic!? After years and years of printing money and propping up the stock market with artificial asset swaps and purchases, an increase of a .25% interest rate from a 0.25% interest rate is still lower then the Greenspan years, will help slow down the possible inflationary trends?
So while major financial analysts are now taking the position that 2016 is a year of recession, the question is what are the indicators? Well for start we see the Chicago PMI closing q4 at a horrible 42.9%, and layoffs have already started. Dow Jones is down near 500 points on the year, and retail is having a horrible ending quarter as shares dump.
All of this screams recessionary trends, yet the FED raises interest rates? This is due to the fact that the FED wanted to act like the economy is not as weak as it actually is. Currently, we see levels of dollar devaluation getting to extreme levels, and the FED is pretending to use the tools necessary to combat the inflationary trends of the currency printing. So while Janet Yellen raised the interest rates, the question of motive is still in play. Why now? Simple, because the recession is already here and in a few months from now when the FED finally accepts that we are in a recession, Yellen can reverse the interest rates and simply say that the rising of the rates were premature. Again, to escape blame from the endless QE policies.
This recession will not be an easy one, and the question then remains; what can we do to reverse the recession in the most allocative manner to stabilize the economy? Raise rates even more! Feel the blow, take the hit, power through a hard recession and liquidate all the bad assets that had been propped up by the horrid fiscal and monetary policies. We need to pop the bubble. However, what can we do in the meantime to protect our financial assets? Invest in foreign equities and hard metals like Gold. This is because Gold and Silver tend to do well in recessionary trends as well as historically during times of QE. If you look at the NASDAQ 10 yr chart you can see gold prices spike up in times of instigated recessionary tools like QE, during the great recession years, and drop when times of market confidence. This recession is going to hit like a storm, and it might be a good move to re-adjust financial assets now because this year will be a bad year for the global economy.
The real speculation everyone should be asking is if the political motives can continue to prop up wall street speculation. Yellen does not want the recession to fall at the end of Obama’s presidency; its much easier for propaganda reasons allow recessions to hit when a new president enters office. Will the FED be able to prop up Obama’s false legacy of fixing the economy? One thing is for sure, 2016 will be an astonishing year.