Pro Perspectives 3/11/22

March 11, 2022

As we end the week, let’s take a look at the year-to-date performance of global asset prices. 
The translation of this graphic:  Lower net worth (a quick hair cut in equity values), while simultaneously facing higher prices of everything.  No surprise, consumer sentiment has been, and continues to be, tanking. 
Is the global war-threat to blame?  Or is the Fed to blame?  
History would tell us, it’s the latter.  The Fed is typically the culprit for ending economic expansions.  In this case, the Fed has waited way too long to address the clear inflation formula that has been brewing from the covid policy response. 
They will start the rate liftoff next week, almost 800 basis points behind the year-over-year inflation rate.  
What was the Fed Funds rate when inflation finally peaked in 1980 at nearly 15%?   17.6%
What about the spike in 1974-1975?  Inflation started to come under control, only after the Fed ratcheted rates up above the level of inflation.  In late summer of ’74, inflation was running 11.5%.  The Fed took rates up to 13%.