Good morning contrarians! The Federal Reserve announces interest rate policy this afternoon. Cryptos are under pressure with bitcoin dropping below $21,000…

It’s clear the market is spooked by the prospect of higher interest rates. Whether it makes a difference if we get 50bps or 75bps is an open question. The Fed has no choice but to raise rates until they break inflation. They can potentially declare victory at some point, but they are going to need some kind of clarity that inflation is abating. We aren’t anywhere close to that right now and may not be for some time.

Yeah, we could get a relief rally if the Fed “only” raises by 50bps, but with inflation still high how much will that help? There will be further meetings (the next one after this is July 27) presumably with further rate hikes. All of that will make business conditions worse and eat into corporate earnings, among other things. That will keep a lid on stock prices.

Plenty of room to be contrarian here, but you know what they say about fighting the Fed…

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