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Jim Rogers: Market Will Stay Weak Until Fed's March Rate Hike

Jim Rogers: Market Will Stay Weak Until Fed's March Rate Hike
(Paulus Rusyanto/Dreamstime)

Thursday, 08 February 2018 03:09 PM

International investor Jim Rogers is advising savvy market players to buckle your safety harness and prepare for a very bumpy ride for at least the next month.

“What I expect to happen is the market will remain weak until March-end. The market will start rallying again after U.S. Fed raises interest rates, and then we shall have to decide what to do next,” the chairman of Rogers Holdings predicted to Zee Business.

The Federal Reserve has forecast three rate rises this year and investors widely expect the central bank to lift borrowing costs again when it meets on March 20-21.

“Frankly, we were up for so long for no reason. Correction was long overdue,” said Rogers.

To be sure, U.S. stocks tumbled anew on Thursday in another trading session with big swings, as investors remained on edge after several days of volatile trading.

The benchmark S&P 500 was still set for a second day of declines, following sharp swings in recent sessions including its biggest drop in more than six years that pulled equities away from record highs.

The retreat in equities had been long awaited by investors as the market climbed steadily to record high after record high with few bumps.

“The next time we have a bear market, it is going to be worse in your lifetime. We have not had a bear market in nine years since 2009, which is quite longer than the way historically things work," Rogers said.

"In 2008 we had a problem because of too much debt. The debt levels are much higher everywhere now, even in China, which had virtually no debt last time. I must say, the next time we have a problem, it’s going to be terrible,” he warned.

Rogers says don’t count on the good times returning anytime soon.

“The market has been up for nine years, so yes, best is behind us. We witnessed a wild explosion in 1999, but then it busted,” Rogers said.

Rogers said he already owns gold, but isn’t sure it is the bulletproof safe haven many investors tout it to be.

“If and when gold goes down, my plan is to buy a lot of gold. My sense is gold will turn into a bubble soon. When turmoil comes, people get desperate to go to some safe place. Gold will turn into a very overpriced asset then. So I would buy gold, but after a while,” he said.

For his part, New York Federal Reserve President William Dudley said on Thursday that as long as the U.S. economy continue to grow at an above trend pace, he would be in favor of another interest rate rise at the U.S. central bank’s upcoming meeting in March.

“We have above-trend growth, we have buoyant financial conditions, we still have an easy monetary policy and this is all taking place with a very large tax cut that’s going to provide additional stimulus,” Dudley said in an interview with Bloomberg TV when asked what it would take for him to support a rate rise at the Fed’s next policy meeting.

“As long as I am comfortable the economy continues to grow at an above-trend pace ... I‘m probably going to be supportive of removing monetary policy accommodation,” he said.

Dudley also played down the impact of the recent stock market sell-off on the U.S. economic outlook, saying that so far the declines were “small potatoes” compared to the rise in equity valuations over the past few years, Reuters explained.

Dudley said the forecast of three rate hikes still seemed a “very reasonable projection” but added there was a potential for more.

“If the economy looks stronger as we go through the year, could that three turn out to be more? Perhaps,” he said.

The sharp selloff in recent days was kicked off by concerns over rising inflation and bond yields, sparked by Friday’s January U.S. jobs report, with investors pointing to additional pressure from the violent unwind of trades linked to bets on volatility staying low, Reuters explained.

The 10-year U.S. Treasury note yield rose as high as 2.884 percent, nearing Monday’s four-year peak of 2.885 percent, after the Bank of England said interest rates probably need to rise sooner than previously expected.

“What we’re seeing today is continued concerns around interest rates going higher, around valuations in the stock market,” said Chris Zaccarelli, chief investment officer with Independent Advisor Alliance in Charlotte, North Carolina.

(Newsmax wire services contributed to this report).

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International investor Jim Rogers is advising savvy market players to buckle your safety harness and prepare for a very bumpy ride for at least the next month.
jim rogers, market, fed, march, rate, hike
Thursday, 08 February 2018 03:09 PM
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