Don’t Believe the Fed’s ‘Serial Over-Optimism’

Don’t Believe the Fed’s ‘Serial Over-Optimism’  - Fed forecast cartoon 03.02.2015

 

As investors wait for the final denouement from the Fed today, we’re reminded of a slide from our Q4 Macro Themes deck about the Fed’s forecasting track record.

 

In short, don’t trust the Fed’s "dot plot."

 

Don’t Believe the Fed’s ‘Serial Over-Optimism’  - 10 28 2015 Fed dot plot

 

For folks putting too much stock in central planner sagacity, consider that the Fed’s “dots” suggest interest rates hikes will extend into 2018. No worries, if you believe the Fed's growth forecast out that far. Note that continued economic growth into 2018 would imply one of the longest expansions ever. 

 

Believe those dots at your own peril.

 

By our tally, the Fed’s GDP forecasts have consistently overestimated growth, every year over the past 5 years, to the tune of 100 basis points. You know where we stand, #GrowthSlowing and rates #LowerForLonger.

 

Editor’s Note: Hedgeye CEO Keith McCullough is hosting a LIVE + INTERACTIVE online event today at 2:10pm ET offering immediate market reaction and commentary on the Fed statement. Click here to listen in.


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