Fed’s Powell signals the need for faster rate hikes

After Federal Reserve Chair Jerome Powell indicated that the bank isn't finished raising rates, a market expert warned that a crash could happen in a matter of days.

They're playing catch up, and while they were doing quantitative easing in 2021, inflation started to rage and now they're trying to catch up, said Larry McDonald, founder of The Bear Traps Report, on Mornings with Maria. McDonald, who wrote a best-selling book on the Lehman Brothers collapse, cautioned that our 21 Lehman systemic risk indicators that look at equity and credit point to one of the highest probabilities of a crash in the stock market looking out 60 days.

On Tuesday, Powell stressed on Capitol Hill that the central bank policymakers are prepared to pick up the pace of rate increases, as they are expecting to go higher than previously thought.

The latest economic data is stronger than expected, which suggests that interest rates are likely to be higher than previously anticipated, Powell said in remarks prepared for delivery to the Senate Banking Committee. If the data showed that faster tightening is warranted, we would be prepared to increase the pace of rate hikes. McDonald argued that for every 1% increase in rates, $50 billion is taken out of the pockets of middle-class families. The expert pointed out that the middle-class families are getting hammered by the fact that nearly 20% of auto loans are one thousand a month, and almost 14% of them are close to 14%. The consumer pressures are violent but the wealthy are doing well with excess savings and higher interest rates on the high end. According to Bear Traps Report founder, the average American investor is making a smarter move by recognizing that there is now a choice between bonds and stocks, and one might be more profitable than the other.

Ten million dollars in cash generates $510,000 a year in Treasuries. A year ago, you said that this was $70,000. We have to do the math, common sense, said McDonald. You've been in the market for two years in these moronic fang stocks that have gone nowhere, the most crowded trade on earth. You're flat after two years, and now you're looking over at a money market fund or a one-year treasury, and you get $510,000 of interest risk-free when you're 70 a year ago. The market crash trigger, he said, will come from the S&P earnings missing estimates big time.

Wall Street is expecting $226, that's priced for perfection. That's why the S&P earnings are probably $190, and that's what happens when we deteriorate in jobs the next two, three months.