Have you ever looked up the recipe for a favorite dish? Maybe its a dish you remembered from a restaurant but you never really attempted to make it at home? I looked up Shrimp Fettuccine recently, wondering how in-the-heck do they get that flavor so perfect? My first attempt was so-so [I still ate all of it]. The more we search for the perfect flavor the more fleeting “perfect” becomes. I do have a perfect spaghetti recipe to share with you at a later date, a concoction I call “Amazing Grace Pasghetti”!

Investors also look for perfection on Wall St. and that’s why I decided to talk about the subject. Bottomline is it’s not going to happen anytime soon. I can think of several reasons why a bull market will evade us for awhile anyway. Let’s get this out of the way first, we are not in a bull market. But that does not mean money cannot be made, or will not be made by some it’s just that one needs to be reminded of governors applying brakes to all things “investing”. These brakes will continue to prevent the United States stock market from re-entering a bull market, which is my thesis here.

First of all, interest rates are not high historically, not at all. Over eons of history U.S. interest rates have been much higher than they are today while the U.S. 10-yr. treasury yield hovers around 5%. This same treasury yield was in the 6.5 to 7%+ handle for decades before the year 2000 and, at the same time, U.S. stock markets traded at a much higher P/E multiple than today. As recently as the late 1990’s stock multiples as well as the 10 year treasury yield were both higher. So what’s different this time around, what has happened to make this economic environment we find ourselves in different?

Two problem areas I can identify insure inflation remains elevated for the foreseeable future:
1) The Federal Reserve has lost all credibility. This is a true statement – markets are having extreme difficulty discerning exactly what the Federal Reserve is thinking. What the Federal Reserve has telegraphed thus far [including the Department of the U.S. Treasury] has confused the investing public [including market strategists] and simply not proved credible. This condition didn’t just begin yesterday, they’ve been destroying their reputation with investors for close to 2-3 years now. One thing I can cite is when the open market committee began an aggressive rate hiking cycle but way late [hyper-inflationary pressures had already set in]. Simultaneous to this effort they were busy increasing the money supply. [Who does that?] These two contradictory actions have now been employed ongoing for two years. Their defense as to why they are following this path is a belief that money markets could fail triggering several bank failures [nationwide]? Gee-whiz Wally. It’s just the way thinks work Beave! 🙂

[Sidenote: If you’re with a tiny little bank because they promised you a quarter point more in interest you’re being reckless these days, read my article on banking with little Mom and Pops, you can use the search button on my home page to find that one. Alert yourself to the fact that both the Federal Reserve, the U.S. Treasury Department and probably that Mom and Pop bank where you stashed your money are all incompetent, you read that correctly. There’s no time in history I can think of where more moons have lined up to announce that stupidity has elevated to the level it finds itself at now in America. Protect the money that you earn!]

A couple things resulted in an explosion of the money supply in this country, that being both COVID Relief programs and uncontrollable Democrat spending on Climate Change and DEI initiatives. [You have my permission to take that to the bank!] Add on top of all that an aggressive rate hike campaign aimed at slowing the economy. [Have your brakes ever failed on you while going downhill in a car or bicycle? The result of that is going to be a lot of things but “pretty” isn’t one of them.] That’s where we are today, at this writing. The brakes being applied are rate hikes but they’re not working because there’s no possible way to control inflation with a ballooned out money supply, [no way Jose’!].

Understand something, the Federal Reserve is weaponized just like all federal agencies these days which means they will preserve Democrat Party agendas [at all costs] first, and the rest of us be damned is their mantra. They are doing everything they can to prevent the far-left Biden Administration from logging an official “recession”. This is a costly strategy as they will find out. When Democrats insist on introducing new regulatory requirements on top of regulatory requirements these act like a tax on society and business. It’s the same as placing handcuffs on a corporation, that place of business will witness slower growth going forward and slower growth means firing instead of hiring workers on top of lower revenues. So the fallout comes when slower growth means lower revenues which equates to lower tax receipts to run the federal government. Get my drift? This is life under Left-Wing Liberal agendas and hence we are already witnessing the largest U.S. budget deficits in the history of our country!

2) Toward the middle of 2023 our Federal Reserve Board telegraphed that we are to expect rate cuts beginning in early 2024, with at least three happening before the end of the new year. That information is now suspect, very suspect, and once again, plain wrong! It now appears that we most likely will not see a cut this year unless for pure political reasons to aid Joe Biden in his re-election effort? I mention this because [other than that] there is absolutely no justification for the Federal Reserve to lower rates in this country. None. Nil. Zero!

In Conclusion
The only good news, take-aways from this writing is we have full employment in this country [an unemployment rate of only 3.9 %] but it is accompanied by persistent inflation. So going back to reckless Democrat spending as well as new regulations to try and control hiring thru DEI initiatives as well as the fantasy that weather can somehow be controlled by man and one can easily see how we got where we are today with this mess on our hands. Now that you know the backdrop I’m going to re-visit my predictions for interest rates through this current cycle, [citing an article I released on brantology.com back in September 2023] wherein I predicted this tightening cycle will end with a terminal rate of 7%, [referencing the short-term rates the Fed controls]. My article predicting this occurrence is titled “File Most Opinions Under “T”, for Trash”. [You can find it quickly by typing those words into the search bar from my main page.] My prediction has not changed since last year yet still no one is quite admitting rate hikes may be in our future. So what’s going to happen here? Treasury yields declined for the better part of 40 years, and that’s been over for awhile. In my opinion, we can now look forward to treasury yields climbing from here, unabated. Only tech oligarchs equipped with H.S. diplomas believe rate cuts are coming soon. Nope, rates are going even higher for one fundamental reason, financial conditions continue to be too accommodative, that’s what I say, that’s the bottom line. We’ve got a Federal Reserve Board in desperate need of a firing, they’re looking like a deer in the headlights about now. What you need to know is that interest rates must go higher before they go lower. I continue to predict that additional hikes totaling 150-200 basis points will be required to eliminate this inflationary cycle… whether this particular Federal Reserve Board remains intact when that happens is immaterial and not included in my prediction.