Is it time to fight the Fed? This veteran strategist says the central bank won’t risk a 20% drop in house prices and a 30% slide in stocks.

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Even before the release of the latest minutes of the last Federal Open Market Committee meeting, bond bears are rising this week. The yield on the 10-year Treasury jumped 23.7 basis points this week, the biggest four-day yield gain since June 5, 2020, as Fed minutes eased the sharp closure of its balance sheet along with rising interest rates. appeared to be discussed.

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Granted, this was a discussion of December 14 and 15, although comments from St. Louis Fed Chairman James Bullard on Thursday suggested that the more aggressive stance outlined in the minutes was still very current thinking.

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David Rosenberg, chief economist and strategist at Rosenberg Research and former chief North American economist at Merrill Lynch, isn’t buying the hard thing from the Fed. “One should be skeptical of the Fed’s forecasts, given the poor track record, even if investors regard them (and the dot plot and FOMC minutes) as gospel,” he says.

Dating back to 2012, the Fed’s forecast on rates has been accurate 37% of the time, on core inflation 29% of the time, on unemployment accurate 24% of the time, and on real GDP growth accurate 17% of the time. And the Fed tends to be very bullish on growth, he adds.

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“What I’m saying is that they say never bet against the Fed in the stock market, but in the bond market, I can tell you with certainty that it’s completely safe to say that you One can bet against the Fed’s forecasting ability — especially when it comes to the one thing the Fed can really control, which is the policy rate,” he says. Housing at its peak, pointing to flattening real consumer spending, much higher inventory, a record high trade deficit and flat-to-down real business speaking, “there is no room for growth in domestic demand to move forward.” The stimulus is not there and yet the Fed continues to play the role of economic cheerleader.”

If the Fed were to raise it to 1.75% next year, it would likely mean a 20% drop in home prices and a 30% drop in equity prices if the average reversal in the price-to-earnings ratio were to occur. Even now, both asset classes are priced 15% higher, he says.

He recommends moving away from cyclical sensitivity in the stock market and toward defensive developments such as health care, staples and utilities; and business in quality, in corporate credit.

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cryptocurrency crime reached a record $14 billion last year, According to research firm Chainalysis, scammers take $7.8 billion and directly steal $3.2 billion. However, as a percentage of all transactions, the company said that crypto crime was record low, as overall volume increased by 567%, but illegal activity increased by 79%.

buzz

Non-farm payrolls are reported by the Department of Labor at 8:30 a.m. The Wall Street Journal economists had expected an increase of 422,000 for December. The ADP earlier in the week estimated that 807,000 private sector jobs were added last month. A wave of data from the eurozone showed inflation there to hit an all-time high of 5%, while sentiment fell to a seven-month low.

ABSI ABSI,
-12.78%
Shares rose after the biotech signed a drug discovery collaboration deal with chemical company Merck MRK.
-0.06%,
With fees and milestone payments of up to $610 million.

Gamestop GME,
+1.28%
Shares will headline after the Wall Street Journal reported that the videogame retailer is launching a marketplace for the non-fungible token and is looking to establish a cryptocurrency partnership.

STMicroelectronics STM,
+1.57%
Milan rose 4% as the chip maker said fourth-quarter revenue was above the top end of estimates. samsung electronics 005930,
+1.82%
said its fourth-quarter operating profit rose 52%, helped by better returns from demand for memory chips and its contract chip-making business.

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US Stock Futures ES00,
+0.15%

NQ 00,
+0.26%
High inches ahead of the payroll report. The yield on the 10-year Treasury weakened to 1.72%.

Oil was trading around $80 a barrel amid unrest in producers Kazakhstan and Libya.

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