Taps Coogan – January 6th, 2022

Evercore ISI Chairman Ed Hyman, one of the fathers of modern market research and perennially ranked as one of the top institutional economic advisors in the world, recently spoke with Fox Business about his concerns that the Fed is tightening too aggressively and that more pain awaits markets this year.

 

Some excerpts from Ed Hyman:

“Monetary policy is very powerful and… it takes one or two years to impact… The very strong employment data that we are getting right now reflects monetary policy one and two years ago… I haven’t seen as negative a picture in a very long time with the rates going up, inverted yield curve, quantitative tightening, the global picture, and now the money supply is going to contract… But they are going to get inflation down… I think (inflation) can go a lot lower than people think… there are very long lags involved. I think the economy is going to be in recession and financial assets are going to be under pressure… I think (the Fed) is pushing too hard. I don’t think they should pivot but they should slow down and pause a little bit to see what they’ve gotten done so far…”

“The stock market is still up almost 50% in the past five years. It’s easy to forget and the same is true for house prices. It wouldn’t be the worst thing in the world to continue having the stock market consolidate and to have house prices consolidate for a while…”

“This is a global (tightening) phenomenon… The ECB is doing twice as much QT as the Fed is doing. We’re not just counting it up clearly enough in my opinion… I’ve done a huge amount of work on what matters the most and as you might guess, it’s the global policy making that makes the difference, not just the Fed…”

We’ll only add that it has been less than a year since the first rate hike of this cycle. Likewise, the balance sheet has only started to meaningfully decline since September.