The Fed Could “Break” Financial Markets If They Hold on to their Hawkishness, Says Guggenheim’s Scott Minerd

Scott Minered Guggenheim
Scott Minered Guggenheim

The Federal Reserve will likely pivot away from aggressive interest rate hikes soon – and if it doesn’t make the move, it could “break” financial markets, according to Guggenheim Partners’ Scott Minerd.

On Thursday, Minerd told CNBC’s “Closing Bell: Overtime” that the Fed will likely have to halt or reverse its tightening campaign soon.

“All the signs are there,” he said. “I can’t tell you exactly what will cause it, but the environment is ripe.”

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“And when the Fed pivots, they’re not going to preannounce it, they’re not going to ring a bell.”

The US central bank is closely monitoring inflation and employment data releases, the Guggenheim global investment chief noted in a recent outlook. But he helieves financial stability and market functioning should also be on the central bank’s radar.

“The environment is ripe for a crisis, and if the Fed keeps its hawkish communication up, I think we’re quite likely to have something break in the financial markets,” he told CNBC. 

Minerd pointed to the UK — where the Bank of England has started temporarily buying government bonds to stabilize debt markets — as one example of central bank tightening leading to breakages.