Dr. Doom may finally be right

Marc Faber, “Dr. Doom”, has been incredibly wrong through the years predicting the demise of the market. But this time he may be on target with his prediction that the Fed won’t raise interest rates this year.

 

The Fed announcement will be made within a few hours and likely not be overly declarative about its future intentions. But currently very little seems to be going in the right direction to justify the raising of rates. Unemployment has remained at about 5.5%, but labor force participation continues to be historically very low. This could explain why wage increases, very important to the Fed, have been nominal.

 

Another key mandate for the Fed is to have the inflation rate get to or a bit above 2%, but that’s just not happening. It’s in our historical DNA to be much more concerned about inflation than deflation. But the latter, in today’s world, is much more a threat.

 

Lastly, although the U.S. is the envy of the world in terms of its GDP, the fact is GDP has been less than robust and has been becoming increasingly tepid. Throw in the fact the rest of the world depends on our economy, it would seemingly be risky of the Fed to disrupt what is a fragile global economy.

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