Gundlach Says Fed Will Hike “Until Something Breaks”, Dumps Bank Shares

Wednesday, March 8, 2017
By Paul Martin

by Tyler Durden
ZeroHedge.com
Mar 8, 2017

Last week, in an abrupt shift to his bullish posture, Bank of America strategist Michael Hartnett laid out how he envisioned the transition from the current “Icarus” rally to what he dubbed the market’s “Great Fall” – or “Humpty Dumpty” trade – which he expected to take place in the second half of the year, and which he said would be precipitated by another downward inflection in EPS, but more importantly, a more hawkish Fed. Specifically, he showed a chart which revealed that historically, once the Fed starts tightening, it keeps tightening until there is a “financial event.”

Overnight, in his latest webcast to DoubleLine investors, Jeffrey Gundlach echoed Hartnett, when he said that he expects the Federal Reserve to begin a campaign of “old school” sequential interest rate hikes until “something breaks,” such as a U.S. recession. As we noted yesterday, Gundlach – who does not believe a recession is imminent – said that U.S. economic data support a rate increase as soon as the next Fed policy meeting next Wednesday, and further rises this year after a series of false starts in 2015 and 2016, .

“Confidence in the Fed has really changed a lot,” Gundlach said on an investor webcast quoted by Reuters. “The Fed has gotten a lot of respect with the bond market listening to the Fed” now that economic data support the tough rhetoric from Fed officials.

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