Raising Rates is a fool's errand. The Fed must undo what it has done, or at least stop what it is doing if today's soft data undoing is any indication. Stocks may be near ATHs, but the organic economy is still non existent. We have no choice but to continue to 'shoot the moon' and maintain levitation of equities on easy money. Combined with a healthy dose of prayer for organic recovery, the Fed may indeed delay death. That is, until the baby boomers cash out.
This means that while the next Fed action may not be easing, it most certainly would be foolish to be to tighten.
Gold ,Silver and Oil add to gains, the USD is softer,and stocks dump on bad news and then seem to digest that rate hikes are a no-no now. All are saying this in reaction to the hugely disappointing Empire numbers today. If the Fed raises again, we bet QE4 is the next play thereafter.
Market prices at 9:05 am
live chart HERE
And here is why.....
via zerohedge
Having surged to its highest since Oct 2014 early in the year on the back of Trumptopian exuberance, Empire Fed's manufacturing survey crashed back to -1.0 in May
4 standard deviations below expectations.
This is the worst (and first) contractionary print since October 2016 as New Orders crash from 7-year highs to 7-month lows.
Prices paid and received both fell (deflationary threat from China), inventories shrank (bad for GDP), average workweek and number of employees dropped (not making America great again), and future capex expectations plunged to 7 month lows.
All in all - a perfect reflection of the death of animal spirits and why paying attention to the the spikes in these surveys - while ignoring 'hard' data - is a fool's errand.
To the above we can only reiterate the obvious. Rates may go up in the future, but hikes will lag inflation so as to keep the helium in the stock balloon. Real rates are going to go down we think. And that is why Gold will be strong in a rate rally. Absent organic recovery from actual increased productivity, any rate hike is a fool's errand. And if no rate hike comes at all, then inflation is worse.
Under what scenario will the USD not weaken globally? The USD could remain the tallest FIAT pygmy for sure, but Gold is going to go up against every major currency as it has for the last several years. Bank on it.
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