The Fed’s latest hiking cycle is going to end in another recession or financial crisis, according to one Morgan Stanley strategist. “Every rate hiking cycle of the last 70 years has ended in recession… and/or a financial crisis… Now we know that it is not going to be different this time,” said the bank’s chief European equity strategist in regards to the recent bank collapses. Fears of a full-on financial crisis are not unfounded, as many key indicators are flashing warning signs. Bond and stock volatility has surged, the U.S. bond yield curve is quickly “de-inverting”, and high-yield credit spreads jumped the most they have in three years, to name a few. In light of the banking crisis, many experts are predicting that the Fed’s hiking cycle may be coming to an end. Axel Merk, President and CIO of Merk Investments said that’s a good thing for gold. Merk said that there is no question that gold prices are going higher in this scenario, as lower real rates will make gold “an attractive non-yielding, safe-haven asset.”

MarketWatch/Steve Goldstein
Every hiking cycle over the last 70 years ends in recession or a financial crisis. ‘It’s not going to be different this time,’ Morgan Stanley strategist says.

One of the mysteries for the first two months of the year was the fact that the U.S. economy was seemingly absorbing a wave of Federal Reserve interest-rate hike without a hiccup.

After the events of the last two weeks, that notion can be put to bed. “Every rate hiking cycle of the last 70 years has ended in recession (c. 80% of the time) and/or a financial crisis (in 1984 and 1994),” says Graham Secker, chief European equity strategist for Morgan Stanley in London.

“A week ago it was possible to argue that this observation was theoretical, now we know that it is not going to be different this time,” he added.

Continue reading, here.

Business Insider/Anil Varma and Zinya Salfiti
Fear of financial crisis unleashed chaos across markets this week. These 7 charts show how the shockwaves engulfed stocks, bonds, and commodities.

Global markets were already braving a period of extraordinary angst over inflation, interest rates, and recession risk when a sudden string of US bank failures sent shockwaves across the financial world.

That’s pushed investors across stocks, bonds, and commodities into crisis mode — with key market indicators flashing signs of elevated stress and some even lurching toward the extremes of previous turmoils.

You can read the full article, here.

Kitco News/Neils Christensen
The Fed is done – Axel Merk

The biggest bank failures in the U.S. since the 2008 Great Financial Crisis have revealed just how fragile financial markets are as the world comes to grips with years of cheap money abruptly halted by the Federal Reserve’s aggressive monetary policy stance.

In an interview with Kitco News, Axel Merk, president and chief investment officer of Merk Investments, said that there is no question that gold prices are going higher in this environment. He noted that while the Federal Reserve may raise interest rates by 25 basis points at next week’s meet, this tightening cycle has effectively ended.

You can read the full article, here.

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