Keith McCullough, founder and CEO of Hedgeye Risk Management, isn’t one to mince words about financial markets, the Federal Reserve or the economy.
Even if the Fed were to relent, McCullough says the damage is done. “They’re far too late,” he says of the Fed. “Just like it was impossible for them to stop inflation, it’s impossible for them to stop the pending U.S. corporate profit recession or the mainline recession.” Free money forever created behavioral problems and a behavioral bubble for the markets and investors. You believe you’ll have unlimited access to easy money and your behavior, whether you’re building profitless growth companies through storytelling or cryptocurrencies that also are just stories. You’re coming from the mother of all behavioral bubbles that now will be addressed with tighter money.
“ ‘The big screw-up people will have is that the minute they see Fed dovishness, they’re going to buy stocks and crypto.’ ” McCullough: The Fed first has to realize that what I’m talking about is the high-probability event. That will take time. It’s not going to take them a month. They have to realize we’re in a recession, then make the commensurate policy pivot. Then, when the Fed does go dovish and realize we’re in a recession, that’s bad for the stock market.
“ ‘The Federal Reserve, even if it were to turn dovish on interest rates tomorrow, will have a hard time stopping the profits recession.’ ”