by David Brady
Sprott Money
For once the Fed surprised the markets with a far more hawkish message than anticipated. The Fed stated that inflation was not only persistent but also expected to rise even further, aided by the continuation of supply chain issues. With this in mind, they announced that rate hikes and another round of ‘QT’ (reducing the balance sheet) could start sooner than anticipated and that the balance could shrink even faster than last time around.
How did the markets react? Stocks dumped almost immediately and closed at the low of the day. As forecast months ago, this caused real yields to spike higher to levels not seen since June. The dollar rebounded. The combination of these factors led to precious metals and miners getting slammed. None of this should be a surprise to you. I’ve been citing the risk of a sharp drop in stocks coinciding with a jump in real yields supporting the dollar and weighing on the metals, and here we are. So where do we go from here?