It’s literally 1937 all over again.
Many analysts have called for the Fed not to repeat its mistake of 1937.
That mistake?
Raising rates when the economy was already weak. Doing this prolonged the Great Depression.
However, few commentators point out WHY the Fed raised rates in 1937.
The reason?
CPI hit 3.7%.
Notice that by raising rates the Fed kicked off another terrible round of deflation with CPI falling from 3.7% to -2.0% in JUST ONE YEAR.
Fast forward to today. The US’s inflation rate is moving vertical…
Core inflation is already ABOVE 2%.
The Fed is cornered. If core inflation continues to rise the Fed will be forced to raise rates, kicking off another market meltdown. In 1937 when the Fed hiked rates during a weak economy, stocks plunged 40% in the following 12 months.
Buckle up, it’s coming.
Best Regards
Graham Summers
Chief Market Strategist
