Mike Schumacher at Wells Fargo Securities is warning that investors need to prepare for elevated interest rates for a long period of time. “So let’s say up to 5%. We think it’s going to be a long time – six plus months, maybe a year. That’s going to hurt equities, we think, and that’s going to hurt risk,” he said. However, Axel Merk, President of Merk Investments, believes those rate hikes will also push investors back to gold. “We know from the years of debt crisis that policymakers are champs at kicking the can down the road. Now, in the context of gold, my guess is that the moment this patching starts in earnest, that will be good for gold. It’s equivalent to a pivot.”

Business Insider/Carla Mozée
Investors need to be prepared for the Fed to keep rates at 5% for up to a year, and that will hurt stocks, Wells Fargo chief macro strategist says

The Federal Reserve is likely to leave interest rates elevated for a considerable amount of time, a move that would keep pressure on stocks, according to Wells Fargo’s head of macro strategy.

Investors have been trying to gauge when the Fed will hit pause on hiking interest rates after the central bank this year embarked on an aggressive path to get high inflation under control.

“But I think the thing people really need to focus on the most is how long does the Fed keep that fed funds rate really high,” Mike Schumacher at Wells Fargo Securities, said in an interview with Bloomberg TV on Monday.

You can read the full story, here.

Kitco News/Neils Christensen
The Federal Reserve will break something and that will be good for gold – Axel Merk

Investors can expect gold prices to remain volatile for the foreseeable future as markets react to ever-changing interest rate expectations; however, the precious metal still provides long-term value and protection in a portfolio, according to one hedge fund manager.

In an interview with Kitco News, Axel Merk, president and chief investment officer of Merk Investments, said that while many investors have been disappointed with gold’s price action through 2022, he notes that it has outperformed both bond and equity markets this year.

Many analysts have pointed out in recent weeks that the traditional 60/40 portfolio allocation has seen its worst start to the year since the mid-1930s. The S&P 500 is down more than 20% this year and an aggregate of bonds is down roughly 15%. Meanwhile, gold prices are down about 10% so far this year as prices continue to hold support at around $1,650 an ounce.

You can keep reading, here.

Reuters via Yahoo Finance/Prerana Bhat
Fed to hike by 75 bps again on Nov. 2, should pause when inflation halves – economists: Reuters poll

The U.S. Federal Reserve will go for its fourth consecutive 75 basis point interest rate hike on Nov. 2, according to economists polled by Reuters, who said the central bank should not pause until inflation falls to around half its current level.

Its most aggressive tightening cycle in decades has brought with it ever bigger recession risks. The survey also showed a median 65% probability of one within a year, up from 45%.

Still, a strong majority of economists, 86 of 90, predicted policymakers would hike the federal funds rate by three quarters of a percentage point to 3.75%-4.00% next week as inflation remains high and unemployment is near pre-pandemic lows.

Results in the poll are in line with interest rate futures pricing. Only four respondents predicted a 50 basis point move.

Continue reading, here.

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