The drastic increase in debt defaults show that rate hikes are starting to bite. The “free money” measures during COVID-19 seem to have delayed, not solved, the problem.
The Fed is headed for an annual operating loss for the first time in 108 years. They will soon be forced to print the money to cover their expenses. A conundrum, indeed!
Rising interest rates reveal the consequences of exorbitant debt and leverage. When the free money disappears, what remains tends to flow into real assets.
The yield curve just inverted, a signal that has accurately predicted 10 out of the last 10 recessions. As investors exit the bond market, where will they go?