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Higgins Capital Management, Inc.

Inflation Is Forcing Higher Interest Rates Into Your Future.

Central Banks around the world are rushing to walk back years of failed MMT policy. 

Global economies will pay for the policy failures.

It’s a double whammy of higher interest rates and shrinking Central Bank balance sheets.

The days of financial repression and free money are over.

Don’t be lulled into believing that The Fed will pivot.

Perhaps a pause but not a pivot.

Unchecked inflation destroys countries. It destroys civilizations.

Don’t underestimate the severity of the issue.

The global crusade is now about deflating asset bubbles.

Fixed income and real estate are particularly vulnerable.

Trillions have already been lost in stocks and bonds.

Real estate is beginning to roll over.

A recession is a foregone conclusion.

The Fed is set to raise rate .75% this week and probably another .75% in December. This is the fastest hiking cycle for the Fed since the 1980s.

The effects have not yet been reflected in the economic numbers.

This great rally we’ve had in October has been an opportunity to sell positions and lighten your exposure to market risk.

We believe that stocks will continue sell down as interest rates continue to move up.

Don’t be complacent. This is one of those times in your life when you must ignore the noise and focus on your personal situation.

The Fed will only stop raising rates when the severe damage from rate hikes is clearer. 

Add the shrinking Fed balance sheet to this mix and you have a toxic witches brew for the economy, stocks, bonds and real estate.

Trying to “ride this out” may result in losses that you can’t make up.

History is littered with horror stories of the damage caused by out of control inflation. The Fed has a “whatever it takes” approach to reducing inflation back down to their target. 

Don’t underestimate this commitment.

The second part of the specter looming over markets is The Fed’s balance sheet reduction, also known as quantitative tightening (QT). 

Simply put, this means there will be less money in the system; lower liquidity.

The process of timing and the effects of QT will become more apparent as The Fed trims its balance sheet. 

The only real question is this: “Does The Fed have the willpower to withstand the political pressure that is sure to mount as the recession deepens?”

You don’t want to bet the outcome with your hard-earned wealth. 

But understand this: There is always a bull market somewhere and we’re Bullish on America. Just not on out of date strategies.

Learn more about Higgins Capital.

The information contained in this Higgins Capital communication is provided for information purposes and is not a solicitation or offer to buy or sell any securities or related financial instruments in any jurisdiction. Past performance does not guarantee future results.

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Ray Higgins
San Diego