'Something has now broken' amid Fed rate hikes: Strategist
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'Something has now broken' amid Fed rate hikes: Strategist
'Something has now broken' amid Fed rate hikes: Strategist
Pressure is growing on the Federal Reserve ahead of next month's policy decision. Continued volatility in the banking sector, higher oil prices, and the possibility of more rate hikes is creating uncertainty on Wall Street. One strategist says that the collapse of Silicon Valley and Signature banks are ultimately going to derail Fed's rate hike plans. "[The Fed] essentially told the markets that they were going to raise rates and shrink the size of their balance sheet until something broke. Well guess what? Something has now broken, as we've seen in the banking system," says Hennion & Walsh CIO Kevin Mahn. Mahn also believes the continuous rate hikes will weigh on upcoming earnings, pointing to a recent FactSet analysis that predicts an earnings decline of 6.6% for the S&P 500. However, the strategist doesn't see the entire situation as a negative. "If there's a silver lining to all of this, it's going to prevent the Fed, in my opinion, from being as aggressive as they wanted to be to help combat inflation." Watch Seana Smith's entire interview with Kevin Mahn here. KEY VIDEO MOMENTS: 0:14 Mahn on the Fed raising rates until something broke 1:35 Mahn on why he believes there will only be one more rate hike in 2023
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'Something has now broken' amid Fed rate hikes: Strategist
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Pressure is growing on the Federal Reserve ahead of next month's policy decision. Continued volatility in the banking sector, higher oil prices, and the possibility of more rate hikes is creating uncertainty on Wall Street. One strategist says that the collapse of Silicon Valley and Signature banks are ultimately going to derail Fed's rate hike plans.
"[The Fed] essentially told the markets that they were going to raise rates and shrink the size of their balance sheet until something broke. Well guess what? Something has now broken, as we've seen in the banking system," says Hennion & Walsh CIO Kevin Mahn.
Mahn also believes the continuous rate hikes will weigh on upcoming earnings, pointing to a recent FactSet analysis that predicts an earnings decline of 6.6% for the S&P 500. However, the strategist doesn't see the entire situation as a negative.
"If there's a silver lining to all of this, it's going to prevent the Fed, in my opinion, from being as aggressive as they wanted to be to help combat inflation."
Watch Seana Smith's entire interview with Kevin Mahn here.
KEY VIDEO MOMENTS:
0:14 Mahn on the Fed raising rates until something broke
1:35 Mahn on why he believes there will only be one more rate hike in 2023
Video Transcript
KEVIN MAHN: My outlook for this year was better days ahead for the markets, but not necessarily the economy. I think that's holding true and coming to fruition. And this is all because the Federal Reserve since March of last year, essentially told the markets that they were going to continue to raise rates, and shrink the size of their balance sheet until something broke.
Well, guess what? Something has now broken as we've seen in the banking system. We saw the impact that those rising rates had on housing.
We've now seen the impact that it's had on regional banks, and we're going to soon see the impact that that's had on earnings and the economy. For the first quarter of 2023, as it stands now, according to FactSet, the earnings of the S&P 500 are expected to contract, go down by 6.6% on a year over year basis.
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