Jim Bianco: The Fed Will Crush Inflation and with it, the Stock Market

The Fed is on a single-minded mission to fight inflation, according to Jim Bianco. To do that, it will crush stock prices and home values.

Bianco spoke virtually on May 6 at the Strategic Investment Conference, hosted by John Mauldin. Bianco is president and macro strategist at his own firm, Bianco Research, L.L.C., which is based in Chicago. Bianco spoke last year as well, when he correctly predicted that inflation would be non-transitory.

The Fed will continue to raise rates until inflation “really moderates,” he said. That means it needs to get back to the Fed’s target of 2% inflation. If the Fed stops raising rates short of reaching its target inflation, Bianco said it risks losing its credibility “for a generation.”

Indeed, it will be “really hard” to get to its 2% target, according to Bianco, and the Fed may have to increase the aggressiveness of its policies.

He spoke the day after the Dow had declined by more than 1,000 points.

“The Fed will create more indigestion than we have already seen,” he said.

To understand why inflation is so high, Bianco showed that the U.S. has the highest rate in the developed world:

That is because, since 2019, the U.S. has pursued more stimulative policies than any other major economy. As a result, U.S. real disposable personal income is well above the OECD median.