Old Wall investors are hoping (and praying) like mad for a big Fed rate cut. They’re effectively crossing their fingers a cut will be the catalyst to new all-time highs in the stock market and a U.S. dollar devaluation.
Hedgeye CEO Keith McCullough and Senior Macro analyst Darius Dale have some bad news for them:
- Hope is not a risk management process.
- The world is currently in Quad 4 (growth and inflation slowing simultaneously).
- The value of the Euro, British Pound, Chinese Yuan and any number of emerging market currencies is falling, which helps drive the world’s reserve currency (U.S. dollar) up.
“This is what creates the upward thrust, because everything else is going down at a faster rate,” McCullough explains in the clip above from a recent edition of The Macro Show.
“That’s how the currency war is effectively shown: it’s against U.S. dollars. And now the U.S. is going to have to fight like mad – 50 basis-point cuts at a time. If the Fed doesn’t do that…that’s going to be a disappointment and the dollar is going to go up even more.
“When you’re in the thralls of a currency war and it’s a global slowdown, this is the most dangerous point.”
Watch the full clip above for more.