As investors around the world faced a global stock market sell-off on Monday, the Federal Reserve came under pressure to intervene. However, bestselling author and market risk expert Lawrence McDonald warns that an emergency rate cut by the Fed may do more harm than good.
At Extreme Investor Network, we understand the complexities of the market and provide unique insights to help you navigate through uncertain times. The sell-off was not driven by a banking crisis but rather by the unwinding of the carry trade, where investors borrow cheap yen to buy assets globally. This trade worked well until the Bank of Japan hiked its interest rates, causing the yen to strengthen and triggering the sell-off.
McDonald cautions against the Fed cutting rates, as it could potentially strengthen the yen further and disrupt the market even more. Instead, he suggests that using the Fed’s balance sheet may be a more prudent approach in addressing the situation.
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