Market Analyst, Liz Young from SoFi, has weighed in on the ongoing debate over whether the Fed should hike or pause.
Young believes that the responsible thing to do right now would be to pause, as it appears that if the Fed hikes, they are not paying attention to everything else that’s going on.
However, even if there is a pause, she thinks they will hike again, and the risk here is that the market won’t like it either way.
She notes that yields and growth are both up, but ultimately, they can’t both win that game.
Young is worried that investors are not stepping back enough and looking at the bigger picture, given the many bad headlines over the last five days.
She warns that a rally just can’t continue at this clip, no matter what the Fed does.
The current rally is predicated on the idea that the Fed might pause and might have to reverse course, but Young warns that if inflation remains high, or if they reverse course before it’s fixed, we have a semi-permanent higher cost of capital that is not good for gross stuff.
Despite this, the NASDAQ and large-cap tech stocks continue to rally, suggesting that investors continue to be conditioned that lower rates and growth are good.
Young notes that the recent market events have done a lot of the Fed’s job for it, and there is a suggestion that interest rates should pause until the degree of demand destruction can be evaluated.
However, Young thinks that if they do pause, there’s a chance that the market will really like it, which is actually the opposite of what they need to happen for inflation.
Ultimately, Young believes that we are stuck in a range where we’re waiting for every tiny little piece of news, and the market won’t like a hike or a pause.
