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Interest Rate To 2% Next Year As Fed Saves Economy From ‘Four Horseman Of Deflation’ | Jim Thorne



Interest Rate To 2% Next Year As Fed Saves Economy From ‘Four Horseman Of Deflation’ | Jim Thorne

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Jim Thorne, Chief Market Strategist at Wellington-Altus Private Counsel, discusses his outlook for Fed monetary policy, market reaction to this week’s 50 basis point rate cut, and impacts of deflationary forces in the economy.

Watch Jim’s last interview with me: https://youtu.be/3-E7K73Q6Uc?si=q9rfcuGGPtc6-USM

*This video was recorded on September 19, 2024

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0:00 – Intro
2:30 – Are we in a financial crisis?
7:20 – Historic market reaction to a Fed pivot
10:20 – What markets are pricing in now
12:30 – Decade of low growth
14:52 – 2% Fed Funds rate by next year
20:00 – Bond market outlook
21:00 – Stagflation possibility
23:40 – Monetary policy mistake
25:20 – Bank of England rates
27:20 – U.S. dollar outlook
30:00 – Risks of deflation
31:48 – Is “cheap money” the norm?
34:40 – Investment implications

#economy #stocks #investing

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View 48 Comments

48 Comments

  4. @SarahJeffy on

    The belief that the Federal Reserve would stop raising interest rates was the driving force behind the entire economic chaos. What should we do now that we have a situation where interest rates are crashing? At this point, how would you suggest that I safely allocate $300k?

  6. @jmaietta on

    The problem with r-star and the Laubach-Williams and Holston-Laubach-Williams models is that Real GDP is significantly overstated as the GDP deflator / CPI are woefully understated.

  10. @jmaietta on

    16:46: The issue with Truflation is that they do not perform apples-to-apples price comparisons on the SKU data they collect. Instead Truflation employs “average pricing” across a category, which is similar to the BLS’ rotation methodology. For example, BLS assumes that if the price of beef filet goes up, consumers will rotate down to a less expensive cut such as sirloin or ground beef. The following is Truflation’s methodology as provided on page 14 of their methodology document: “For example, in the food categories, if we collect the price of all available stock keeping units (SKUs)/items. With this information, we have volumetric data that allows us to create an average price. Truflation believes in capturing as comprehensive a snapshot of consumer experiences as possible. Therefore, we do not employ a chain-price technique.” Rotations and Average Pricing methodologies understate SKU-level price increases.

  12. @ronjoseph7973 on

    This guy doesn’t have a clue. The 40 year commodity cycle is turning back up. Since Reagan, who financialized the economy, commodities have been in a bear market. Today, you can buy a gallon of gas with a 90% silver quarter, the same price it was in 1968. Farmers, on shore manufacturing, and energy producers are shuttering plants. It’s not going to take years for the rate cuts to have an effect. Look at what happened just one day later. On August 5th, the Yen carry trade collapsed leading to an unprecedented rise in the VIX, which completely disrupted the options markets. The dollar will fall and I believe that’s what the rise in gold is telegraphing. In 18 months, we will see gold at $3500 or more and the S&P at $2500, while goods and services, especially healthcare will continue to rise. Harris has intimated a version of Nixon’s price controls and we all know how that ended. If Trump gets elected, his tariff program will be highly inflationary. I was in my mid 20’s during the great inflation of the 1970’s and the Texas oil bust and depression from 1983 to 1992. I can very well see a variation of that scenario on a much wider scale.

  13. @gregorywhem on

    Man, the Fed rate cuts are starting to mess with everything. I mean, they were supposed to help, but now I’m feeling the pinch. My savings of 600k is basically giving me nothing, and the stock market projection is all over the place. Is this really a good time to buy stocks?

  16. @workphone4210 on

    YAH NOW THEY WANNA DROP IT REALLY GOOD TO SAVE FACE BUT TRUELY KNOWING USA IS GOING TO BE IN A CIVAL WAR OR A WAR N GENERAL SOMETIME N THE NEXT 12 MTHS. NO METTER WHO WINS N 2024 THE OTHER SIDE IS GOING TO PROTEST & RIOT U CAN COUNT ON THAT. THEY R.

  18. @jmaietta on

    28:00: The pace of Gen AI advances will slow (yes, OAI's o1 preview is impressive), if in fact the 2026/2027 frontier models will cost $100 billion to train as Anthropic's CEO believes. Capital will become a constraint at some point soon. Not many examples of meaningful ROI deployed today as a result of Gen AI. Machine learning, deep learning, NLP and other permuations of AI have been with us for 10-20+ years depending upon the type of AI in question. So, the U.S. isn't going to add 1-2% to GDP over the next several years as a result of AI deployments.

  23. @brianpowell2 on

    The tightening was too aggressive to begin with. The rate hikes have broken an already fragile economy that would have worked out the inflation in the free market. The Fed chose to spark inflation buy napalming the public with stimulus right when the global supply chain was broken and production of good and service basically did not exist during Covid. It was gasoline on the perfect firestorm. Then, instead of letting the inflation work itself out… we hiked rates thousands of times higher than they were in the most massive pounding the Fed has ever given an economy. They chose to break the inflation they created over the backs of the middle class. Now they’re providing a little relief and everyone is acting like it’s going to bring back Covid level inflation and end the world….. Anyone feeling the impact of these economic shifts should consider Crypto long-term trading strategies to protect their assets. My advice to anyone feeling the heat in this inflation, just trade long term more than ever, I have made over 520k from day trading with Francine Duguay in few weeks, this is one of the best medium to backup your assets incase it goes bearish..

  35. @Elizabethwells-q7f on

    The Federal Reserve is aware. They have no intention of combating inflation. They will not stop inflating, and commodities and stocks will rise in tandem with everything else. You can't merely hoard cash and wait for the market to crash; instead, you need to make your money work for you by starting small and accelerating your purchases as the market continues to decline.

  36. @metaljam7197 on

    If the equity markets were falling everything, all the economic data, all the valuations, the bond market, everything, would make sense. However, getting the gamblers to leave the casino after a decade of massive speculation and zerp, will not happen without a catastrophic event. FOMO is on high, everyone is in the same trade, it can't end without a blow out top and a massive drop. None of the equity valuations are based on fundamental principles, it's all speculation. I'll stay out of the tulips craze (AI), and wait for a better valuation with much less risk.