1980s-era rate hikes designed to fight inflation will create more market turmoil, Canaccord’s Tony Dwyer predicts


Stocks may go into a deeper tailspin.

Canaccord Genuity’s Tony Dwyer predicts 1980s-era interest rate hikes will exacerbate the turmoil and make a recession seem increasingly more likely.

“Typically, I’ve been bullish over the years. But there’s a money availability problem,” the firm’s chief market strategist told CNBC’s “Fast Money” on Monday. “Ultimately, you have to have money to buy stuff, to do stuff and to invest in stuff. And, the avenues for money availability have largely closed down since the beginning of the year.”

In a note out this week, Dwyer warns the Federal Reserve is “under significant pressure” to cut inflation by clamping down on demand. He contends the economy is on the cusp of rate spikes reminiscent of Paul Volcker’s tenure as Fed chair.

“Debt-to-GDP in the Volcker era was at a generational low,” said Dwyer. “So, debt to GDP wasn’t anywhere near the issue it is today. We’re at generational high at 138% debt to-GDP. So, if you’re going to take a levered economy and shut it down, that’s not good.”

On Monday, the S&P 500 lost 4% and closed in bear market territory. The tech-heavy Nasdaq fell 5% and the Dow dropped 876 points, its first time ever closing own 600-plus points three days in a row.

The pain on Wall Street coincided with a jump in the benchmark 10-year Treasury Note yield. The move comes a day ahead of the Fed’s policy meeting on interest rates.

“We’ve taken limited money availability, bloated inventories because of the supply chain constraints, cratered CEO and consumer confidence into a lower demand environment in a levered system,” said Dwyer.” “Upside in the market, upside in the economy or upside in anything has to come with more money.”

According to Dwyer, the market won’t reach “the” bottom until the central bank abandons its tightening policies.

“The Fed has to signal a turn,” he said.


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