More Economic Pain Ahead In 2023 – Investment Watch


Last yr was a tricky one for investors. In actual fact, it was the worst yr for Wall Street since 2008. The Dow was down about 8.8%. The S&P 500 fell by 19.4%, dropping greater than 20% from its high. The Nasdaq took the worst hit, tumbling by 33.1%. Meanwhile, the bond market tanked, bitcoin collapsed, and the air began coming out of the true estate bubble.

Peter Schiff recently did an interview with the Epoch Times. He predicted more pain in 2023, primarily driven by inflation and the Federal Reserve.

While price inflation has cooled a bit, it continues to be running far above the Fed’s 2% goal. Nevertheless, there may be discuss a Fed pivot to rate cuts within the yr ahead. Peter identified that “the last couple of times the Fed was in a position to orchestrate a pivot, it did it when inflation was 2% or less.” If the central bank makes that move within the near future,  it is going to “throw gasoline on the hearth.”

High inflation gets even higher, and in that environment, I don’t see financial assets as a bunch doing well.”

Peter said bonds, particularly, will get killed.

That’s bad news for the US government because it continues to borrow and spend. A tanking bond market means higher rates of interest – a giant problem for a rustic attempting to borrow increasingly more money.

Peter said that the yr ahead could possibly be particularly rocky for unprofitable tech firms that benefited from the Fed’s easy money policies up to now, and he sees a continued rotation into “value” stocks from firms with a proven track record of profitability.

If money is losing value much faster than 2% a yr, you don’t wish to wait 10–20 years to get your money. … It’s not firms which are promising earnings in the longer term. It’s firms which have earnings at once.”

More broadly speaking, Peter said inflation will proceed to wear down consumers and make it tougher for firms to take care of revenue streams.

In case your customers are spending rather a lot extra money on food, on energy, on insurance, on rent, on taxes, they usually don’t have anything left over, then it doesn’t even matter in case you cut your prices. You don’t have any customers.”

Peter said the Fed has turned the markets into “a casino” with artificially low rates of interest and money printing. It has distorted markets and created all types of malinvestments.

It’s really helped undermine the productivity of the American economy, which is one in every of the explanations now we have huge trade deficits.”

In actual fact, the central bank has turn into the dominant think about investors’ decision-making.

The Fed must be irrelevant. No one must be making investment decisions based on the Fed. Right away, the Fed is the one thing anybody cares about. ‘Are they going to boost rates? By how much?’ The whole lot is riding on the choice of a couple of guys sitting in a room in Washington, DC That’s not how capitalism is presupposed to work.”

Peter questioned why the Fed must have the facility to make your mind up the worth of cash.

That makes no more sense than putting together a bureau to make your mind up the worth of oil, or the worth of milk, or the worth of bread … That’s what the Soviet Union used to do, and it was a disaster.”

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