Bear Flattener – Jim Puplava

As the Fed withdraws liquidity from the financial markets, the major averages will continue to struggle until eventually they fall. The cyclical bull market in equities is close to peaking, if it hasn’t already. The stock market has very little upside as long as interest rates are rising. The Fed is trying to influence long bond yields higher. It will continue to apply pressure on interest rates until it gets its desired effect. Since there is a six-month lag time between rate hikes and their impact on the economy, the Fed will not know if it has achieved its objective until something breaks. The Fed always overshoots on interest rates and this time should be no different. The obvious casualties will be the financial markets—both stocks and bonds—and eventually the economy.