Craig Hemke – Odd Market Reactions To The Fed’s Hawkish Pause – Is A Crack Up Boom Coming Later This Year?
Craig Hemke, Founder and Editor of TF Metals Report, joins us to discuss the strange market reactions in the US dollar, interest rates, general US equities, and the precious metals sector after the Fed’s supposed “hawkish pause” at yesterday’s meeting. We note how many times this year we’ve seen constantly shifting rate hike, rate pause, and rate cut expectations from the forward-looking markets and Fed funds futures.
General markets rallied on the news, but to see the greenback sell off, while bonds got a bid and interest rates fell, the day after Powell and many Fed heads still signaled a rate hike for July’s meeting, is quite unusual. We saw gold go down initially on Wednesday after the FOMC meeting and into overseas trading, only to rally back higher again on Thursday, above the $1950 support up to around the $1970 level. We discussed how overall, the gold mining stock moves have remained weak to muted overall, and Craig highlights again, that really the GDX and GDXJ have a tighter correlation with silver than with the price movement in gold, and that until we see it starting to move higher that trend will likely persist.
We wrap up with a general conversation about what it will take to bring generalists back into the PM sector, if it necessarily requires a correction to overbought tech stocks and general US equities. Craig points out that once there is a clear Powell pivot back to cutting rates, that we may just see a “crack-up boom” type of move taking all markets higher as the monetary cycle of further easing to is destined to repeat itself once again. With so much government and corporate debt getting ready to roll over at much higher interest rates, there could still be some economic dislocations as this year unfolds that may force the Fed to act quicker than the markets are currently anticipating.