The Federal Reserve will cancel its rate hike by July 4, Bear Traps Report founder Larry McDonald said.
Having predicted a stock market crash within the next 60 days, one investor and best-selling author believes the Federal Reserve will now have to make a big turn to control the “beast”.
“As things go from bad to worse, the beast in the market will force the Fed to cut spending, probably within, I think the first cut will probably be before the Fourth of July,” Bear Traps Report founder Larry McDonald said Wednesday. in Mornings. with Mary.”
McDonald joined in on the market frenzy as U.S. stocks plummeted as banking contagion fears spread to Europe on Wednesday, calling it a “protracted crisis” following the collapse of Silicon Valley Bank (SVB). Dow Jones Industrial Average futures were down more than 500 points before the market opened on Wednesday, while S&P 500 and Nasdaq Composite futures were down more than 70 and 200 points, respectively.
Shares of Credit Suisse also hit a new record low, losing nearly a quarter of their value. Other regional banks seeing sharp declines include First Republic, PacWest and KeyBank.
CREDIT SUISSE STOCK WAS ALL-RECORD LOW
The Fed is expected to meet on Thursday to discuss its next rate hike decision. The central bank is unlikely to shorten that time, but it will happen “very soon,” McDonald said.
“The street was hoping for a 50 basis point rate hike tomorrow… the beast in the market is taking central bankers in the US and Europe and beating them in the meat of the beast, so whatever central banks wanted to do in the future is now very suspicious,” McDonald explained. . “Rate hikes will very soon turn into rate cuts. And what is happening in Europe is just a continuation of relations with the United States.”
Raising rates nearly 500 basis points over 14 months, according to a market expert, creates a bound leverage in the system “that none of us can really see.”
“The entire street of Wall Street 10 days ago was calling for a soft landing or zero landing. Your best and smartest Goldman Sachs couldn’t see it. And so remind people, no regulator on this planet would think of that, right? If Goldman Sachs hadn’t seen this, the regulator wouldn’t [seen] it,” McDonald said.
“Because leverage tentacles are infiltrating the shadow banking system,” he added. “They travel the world, they’re connected to Europe, and what’s happening is just tentacles of leverage seeping in their path, exuding their wealth all over the planet.”
MacDonald said that in a market “crisis” such as the current banking industry volatility, the Fed will be the first to respond to the beast and not do enough in response to the long-term impact.
“They’ve pulled the gun, this FDIC support for uninsured deposits, and it’s just not enough,” the expert and analyst said. “So they need to do more, and the market has shrunk.”
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As a consolation, McDonald suggested that the volatility could provide a “great opportunity” to buy and trade stocks over the next two to three months.
“You have to agree with this political response,” he said. “Long-short value funds are probably the best place to be because they are long-value stocks that are a pretty safe part of the market, but they also get short gains.”
FOX Business staff contributed to this report.
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