Experts at Morgan Stanley believe that the Fed is likely to follow the Bank of England and pivot away from aggressive interest rate hikes. However, Morgan Stanley’s Mike Wilson warns that an earnings recession is imminent and that the potential stock market downside from a sizable earnings decline would likely outweigh the potential upside from a Fed pivot. “Bottom line, in the absence of a Fed pivot, stocks are likely headed lower. Conversely, a Fed pivot, or the anticipation of one, can lead to a sharp rally, especially because we are so oversold… Just keep in mind that the light at the end of the tunnel you might see if that happens is actually the freight train of the oncoming earnings recession that the Fed cannot stop at this point.”

Mining Stock Journal via GoldSeek/Dave Kranzler
Perhaps This Is Why Gold and Silver Have Begun to Outperform the Stock Market

A survey was done by in which 60% of the respondents said that they have been in credit card debt for at least a year. That’s up from 50% a year ago. Forty percent said they’ve been in credit card debt for over two years. A quarter of those surveyed said that the reason they carry outstanding credit card debt is to cover daily expenses. The Fed’s July consumer credit report (it has a two-month lag) showed that credit card debt hit a record $4.64 trillion. It’s likely that credit card defaults are going to start shooting higher, causing increased stress on bank balance sheets and credit markets.

A couple weeks ago Goldman Sachs reported that the losses (bad debt write-offs) on its credit card business hit 2.93% in Q2. That’s the largest loss-rate among big credit card issuers (Goldman in recent years has made a big push into retail banking services). As it turns out, more that 25% of Goldman’s credit card loans have gone to people with sub-660 FICO scores.

You can keep reading, here.

Business Insider/Matthew Fox
A soaring US dollar will force the Fed to pivot away from its interest rate hikes, but that won’t be enough to prevent an earnings recession, Morgan Stanley says

It appears increasingly likely that the Federal Reserve will pivot away from its currently hawkish monetary policy as global US dollar liquidity is now in the “danger zone where bad stuff happens,” Morgan Stanley’s Mike Wilson said in a Monday note.

Just like the Bank of England had to intervene last week by purchasing long-dated bonds to stem soaring gilt yields, the Fed will also likely have to intervene in a similar fashion, whether that means a pause in rate hikes or full-out quantitative easing.

“The first question to ask is, when does the US dollar become a US problem? Nobody knows, but more price action of the kind we’ve been experiencing will eventually get the Fed to back off,” Wilson said.

Continue reading, here.

Kitco News/Neils Christensen
With so many gold and silver bears, it doesn’t take much to trigger a short squeeze

The U.S. dollar’s unrelenting rally at a 20-year high continues to force hedge funds to increase their bearish bets in gold, according to the latest data from the Commodity Futures Trading Commission.

Although there are risks that the U.S. dollar could push precious metal prices lower, analysts note that Monday’s 2% rally in the gold market is an indication that the market is susceptible to a short-covering squeeze.

The silver market is seeing an even more substantial short squeeze as prices last traded at $20.71 an ounce, up nearly 9% on the day. Silver is seeing its best daily percentage gain since mid-August 2020.

You can read the full story, here.

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