Tuesday, 4 April 2017

The US enters the fourth turning ushered in by Fed rate hikes

Fed rate hikes will bring forward the destructive consequences of the 'fourth turning' as positive regeneration is driven by wage growth and the Fed stays deliberately behind the curve as we enter a wage-inflation cycle. 

Yellen's replacement will be key to this playing out as will tax reform and infrastructure spending. Without these demand supports in the economy the rate hikes will trigger a debt deflation triggered recession, and the bond market seems to be still fixated on this downside scenario. 

From an investment standpoint you need to back the new structural winners, while getting out of the new structural losers, ie areas that have been the winners since the early '80s. 

You also have to wonder if Trump will attack North Korea or Yemen.



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