Marc Chandler – 2022 Outlook On Fed Policy, Interest Rates, Currencies, and US General Markets
Marc Chandler, Managing Partner at Bannockburn Global ForEx joins us to share his 2022 outlook on the general markets in relation to the Fed monetary policy, interest rates, currencies, and geopolitics. We start off discuss what effect the change in the market expectations around the Federal reserve finishing tapering, possibly getting in 4 rate hikes, and also a reduction of their balance sheet may mean for the general equity markets.
From the bullish perspective, Marc pointed out that we are in a strong M&A period of corporate consolidation and in corporate balance sheet strength, paired with a backdrop of 1.8% 10-year treasury rates that are still low enough to be stimulative to the markets when real rates are still so steeply negative.
From the bearish perspective, Marc notes that the pent-up surge in consumer demand we saw last year has already tapped most families excess savings, and that the last 3 economic downturns came after oil prices essentially doubled. When those factors are weighed along with 3-4 rate hikes and a Fed balance sheet reduction, it may prove to be too much and turn the economy down.
We wrap up with a look abroad at the currency markets, where most of the other central banks are also tightening monetary policy, and there are no shortage of geopolitical cross currents. In particular we review what forces may be behind the recent dollar weakness, and moves in the Euro, Canadian Dollar, and Pound.