End of Cycle: Collision Course

[Francisco Monjardino]

Faz tempo que não publicava uma chamada de atenção para os sempre interessantes artigos publicados no site financialsense.com.

Aqui fica o link e um pequeno excerto do Market Wrap Up de ontem:

- END OF CYCLE: COLLISION COURSE , by Frank Barbera

"Looking back at the history of Fed tightening cycles there is one giant and ever-recurring event —- the late-stage "Crack-Up Boom". Put another way, it seems that on this occasion—as in others in the past—history has at least one important lesson to recount. Namely that Fed tightening cycles normally do not end with a "whimper". Instead, more often than not, they end with a "bang". So we find that 2006 could potentially be a case of history repeating itself."

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"Looking at the current cycle we find that since early 2004 the Fed has been hiking rates on the Fed Funds from a low of 1% to the current rate of 4.75%. Most economists now anticipate a further move to 5% in May and possibly even 5.25% in June. Importantly, expectations have been running high since last December that the "Fed" is almost done with its long series of rate hikes. Yet as can be seen in the table below in the 11 prior "tightening cycles" seen since 1946, 9 out of 11 times the U.S. economy has ended up in recession and in a "hard landing". This suggests, once again, this marked tendency on behalf of the Fed to "overdo it with too many hikes". What's more, in the eight instances since 1929 when the Fed has raised interest rates by more than 175 basis points, the stock market—as measured by the S&P 500—was down 12 months later, 6 out of 8 times with the average loss, a decline measuring 7.50%."


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Um abraço,