Richard Bernstein, CEO and chief investment officer of Richard Bernstein Advisors, joins ‘Power Lunch’ to discuss forces that drive valuations, the growing speculation bubble and what stocks work in the current economic environment….(read more)
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The Federal Reserve (also known as The Fed) finds itself facing a critical dilemma at present – whether to combat or encourage inflation. According to Richard Bernstein, a prominent financial analyst and former Chief Investment Strategist at Merrill Lynch, this predicament is a result of the complex economic situation prevailing currently.
Inflation, the gradual increase in prices of goods and services over time, has been a concern for central banks worldwide. Generally, keeping inflation in check is crucial for achieving stable economic growth. However, in the aftermath of the COVID-19 pandemic, the economic landscape has undergone a significant shift. The Fed’s dilemma arises from the need to balance its mandate of promoting employment and controlling inflation amidst uncertain times.
As the world struggled to contain the impact of COVID-19, governments globally implemented fiscal stimulus measures, injecting massive amounts of money into their respective economies. Additionally, central banks, including The Fed, implemented expansionary monetary policies, injecting liquidity into the financial system. These measures were aimed at averting a widespread economic collapse and supporting businesses and individuals during this challenging period.
The consequences of such expansive fiscal and monetary policies have led to concerns over rising inflation. As the global economy begins to recover, pent-up demand, supply chain disruptions, and rising commodity prices have contributed to inflationary pressures. Consumer prices have increased significantly, with year-on-year price rises across various sectors. This situation has put The Fed in a tight spot, forcing them to rethink their policy approach.
Richard Bernstein suggests that The Fed’s measures in the immediate future will play a crucial role in determining the trajectory of the economy, especially in terms of inflation. However, any action they take will come with its own set of risks and consequences.
The traditional approach to fighting inflation would involve tightening monetary policy. This would mean raising interest rates and reducing the amount of liquidity in the market. Such measures aim to cool down the economy, preventing excessive price increases and maintaining stability. However, implementing such policies prematurely could risk stifling the recovery of certain industries and hampering employment growth.
On the other hand, fueling inflation could be another strategy The Fed may consider. Allowing inflation to rise above the target rate temporarily could have certain benefits. It would reduce the real burden of existing debt, provide a boost to borrowers, and potentially support economic growth. However, this approach also carries risks, such as inflation expectations becoming unanchored, potentially leading to a vicious cycle of rising prices.
Finding the right balance is the challenge The Fed faces today. They must determine whether any inflationary pressures are temporary or persistent. Temporary price increases caused by temporary supply disruptions might not warrant immediate action, while persistent inflation could require a swifter response.
Ultimately, The Fed’s decision will have far-reaching implications for the broader economy and the lives of everyday individuals. A misstep in either fighting or fueling inflation could have ramifications that are difficult to rectify.
As Richard Bernstein highlights, navigating this dilemma requires a holistic understanding of the complex economic factors at play. The Fed must tread carefully, taking into account the long-term consequences of their decisions. Striking the right balance between combating inflation and supporting economic growth will be pivotal in determining the future trajectory of both the United States’ economy and the global financial landscape.
they are all ready fueling ut this is why gold is moving what they are doing with banks are effectively bailing out. no money is gone from the system even though the banks have collapsed this money will show up in the economy it has to go some where and people don't trust there banks the money will show up some where fha extended loans all inflationary and they are causing it. and thus guy us an idiot looool
what about the dept ceiling Rich ? FED has just chosed to destroy the middle class and us dollar, which is no longer will be a reserve currency Rich .. puts on dollar, pitches & torches will come out Rich ..
@2:30 what a dumb comment. Investing on Bitcoin is the only way to go right now!
At the time Yellen and all the other parrots in the Biden Administration were first "yellin" about inflation just being "transitory," … well, they we're trying to soften the edge of the knife. Inflation was "transitory" (or temporary, my word) in the sense that it was moving on (or HIGHER) at the time they spoke those words. And, in fact, HIGHER it did go (always under-reported, of course … to a 9.1% CPI)!!
One thing I have learned in more than 60 years of observance is that the national CPI (average) is always about 80% of some larger number, which will be more reflective as the true number throughout the country. So, for example, if inflation is reported at 6.0 by Washington people it is really 7.5%. (80% of 7.5 is 6.0). The Washington/bureaucrats reported number is ALWAYS lower than the true inflation number. It has to be the "reported" number b/c COLA's for senior citizens (one group for example) HAS to be kept lower so that payments for Social Security (and other groups who receive fed money/subsidies) stay as low as possible regarding money that will outflow from Treasury coffers.
So, back to the "reported" CPI of 9.1% as being the height of inflation. Nahhh, it was a fudged number! This is what Washington does! It was really CLOSER to 11.5! 80% of 11.5 is 9.2! So 9.1, 9.2 … you get the idea. I used 11.5 as being closer to the real number to simplify the math (for understanding purposes). Again, 80% of 11.5 is 9.2 (as close to the number of 9.1% CPI that the feds report).
So, inflation was "transitory" in the sense that it was "temporary," meaning that inflation was actually going HIGHER (which they didn't and couldn't tell you). Remember, figures can lie and liars can figure. This is what plays out in D.C. all the time. To politicians and cabinet figures "it makes good theatrics." To us in the real world … inflation is silent theft, it is the "cruelest and most evil TAX" that becomes the "daily wallet thief" (or money snatcher) of Americans everywhere! It surrounds everyone and the solution for "solving" inflation is propose and pass more legislation that makes the theft more obvious. That's when you have riots in the streets (France, right now! — 3/17/23), that's when you have people going hungrier, higher crime, more poverty, civil unrest, etc.) See where I am going here?? The solution to a problem in Washington is to make the problem worse, create suffering, and embolden the politicians.
It's a vicious circle. For at least 60 years our politicians have NOT served the public, "they have created a population of serfs!" And they will continue to do it until things REALLY break apart in the country. With the financial and banking scandals of the past 9 days now being exposed (coming into the sunshine) we are beginning to see the FIRST of the WORST to come. You ain't seen nothin' yet!!
Jerome’s words juice the market
I’m good either way, I have exposure to tech, healthcare, banks, oil, utilities, consumer discretionary and consumer staples stocks and index funds and a bond fund. Own stocks for good times and bad times
no
Inflation is not the problem. The problem is the purchasing power of the people. Raise the wages of ordinary people. Inflation is an opportunity to close the wealth gap between the rich and the poor. Everytime when the riches raise the price of goods, the gov should raise the wages. In the end, the riches will stop raising price, because more inflation will hurt their wealth, their money in the bank or bonds they are holding will lose value. Those corrupt officials or criminals who stashed cash will also lost their wealth.
Great stream, as always. I appreciate the level-headed approach you take to the news and the markets. Most people believe that investing in crypto and stock is all about holding till it rises, with the last crash in the market and recession. We should know that long term price predictions are very difficult to achieve. It's better to trade short term and make profit. MR K got me cover as I am comfortably making up to 10 BTC monthly.
can FED bailout our portfolios as well? I mean the FED gave billions to private financial companies, why can it give it to Americans too? is it fair that I didn't get a bailout?
Just do something that will earn you money while you sleep, no matter how little. The pandemic is the perfect way to open your eyes to really see what life could be like without your usual income stream and everyone had to stay at home. Well I never felt it because I invested in a trading company where I earn 4 digits per week. The best thing you can do for yourself is invest more and spend less.
As a foreigner who lived through the entire duration of zero covid for the past 3 years in China, this is by far the most objective commentary I’ve seen on YouTube to date. Economists and business leaders are voicing concerns at the start of 2023 that the year could be a difficult one. JPMorgan Chase & Co. Chief Executive Jamie Dimon said Tuesday that the Federal Reserve may need to raise interest rates to 6% to fight inflation, higher than the peak level between 5% and 5.5% in 2023 that most Fed officials penciled in after their December meeting. Although I read an article of people that grossed profits up to $500k during this crash, what are the best stocks to buy now or put on a watchlist
The problem isn’t that rules don’t exist, it’s that the rules that exist weren’t informed. The SVB debacle was a sign the regulators weren’t doing their jobs. Any politically connected company doesn’t follow rules, because they don’t have to. They can use political influence to get the government’s minions to let the enforcement of the rules slide.
The choice is between Ebola or Coronavirus. Which do you pick?
One of the rare intelligent voices featured on this channel.
It's hard to say that all tech is part of "speculative fervor." The speculative tech stocks, ie. those with negative earnings or poor balance sheets, have been devastated. The tech with a hoard of cash, and continued good prospects, is still up. That is stuff like AAPL. I think it's being sorted rationally.
He has a point about crypto though.
They already made the decision to fuel inflation. Just look at the Fed's balance sheet this past week – UP by $300 Billion.
Fed is concerned? That’s funny. Maybe don’t perpetually print money ad infinitum next time, all they have done is tell market we will come in crush volatility for 2 decades and somehow they’re perplexed at markets reaction function?
its worse then ust some recession so he has to bull crap about no recession. 2nd housing crash in history 2nd biggest bank failure in historic 1st pandemic in 100 yrs inflation in 40 years oldest u.spresident ever falling down stairs and going ludicris things a big deal war , we had our roaring 20s in 2010s a 11 yr expansion and the cherry the money supply hasnt been like this since 1930 and the 4 times it has been negative as is now every time we had a depression. we havent had the current money supply in any downturn from 1940-2021 …i hope someone reads this
Why call all tech speculative. Microsoft, google and etc are reasonably valued. They are so pervasive. We all use their products. Many of your so called defensive stocks are over valued.
What a clown show. It’s clear. Enough said.
Bruh!! Raising rates is inflation, the cost of money goes up! This is ridiculous we think these clowns are intelligent, they aren’t, they are connected and grew up with silver spoons in their mouth
Wives are very ready to kick out the home offices but need a few repairs out of home workers in early summer first. Let them have the money. Remember — anything that seems economically normal isn't. Just ask your wife or mother.
Bernanke and Yellen are responsible for this hot mess….QE and zero% interest for 15 years
Many financial guys are sports junkies for some unknown reason.
Feds have failed all the way around.
OMG I will never give my money to this guy. Wow. He should stick to sports like Hugh Hewitt.
They're balance sheet just increased $297B so you have your answer. Buy gold and get out of the dollar
The average working class stiff could see this coming, but these geniuses act like this is the feds fault.. when we all know it's the recession we've been in for 2 years…
The question is when to resume trading moving forward. It's been halted for a week, very unfair to innocent retail investors. Nobody talks about it.
Not sure why anyone thinks a pause will fuel inflation when we know that anything they do has over a 1 year lag and PPI just came in negative and inflation is down an extreme amount if you look at month over month instead of year over year
I’d say fight real crime like the Biden administration
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All the good economic data just feeds into higher inflation, interest rates aren't working, Fed just restarted QE, hyperinflation around the corner.
Luddite. This is 2023 buddy, technology runs the world.
Inflation appears to be coming from the move to trade with the BRICS Group?
The FED appears to do little to affect that influence?
The realization that the former sources of easy money from exploiting areas like Latin America, are now missing, seems to be something that is overlooked?
Sounds like better odds to a soft landing.
Maybe there should be a regulatory rule for banks like the regulatory rule for retail insurance clients, i.e., if the market rate available is <x% above the backstop rate, banks have to mark their reserves to the market rate. That would allow the Fed to raise rates higher, but banks would only follow those Fed raises so far before being required to mark their reserves to a higher cost market rate.