Shares can go into deep tailspin.
Canaccord Genuity’s Tony Dwyer predicted that the 1980s interest rate hikes would add to the volatility and make recessions more likely.
“Typically, I’ve been bullish over the years. But there’s a problem with the availability of money,” the firm’s chief market strategist told CNBC.fast money“On Monday.” After all, you have to have money to buy stuff, do stuff, and invest in stuff. And, since the beginning of the year, the avenues for availability of funds have largely closed.”
In a note this week, Dwyer warned that the Federal Reserve is under “significant pressure” to cut inflation by pressing demand. He argues that the economy is on the verge of rate spikes, reminiscent of Paul Volcker’s tenure as Fed chairman.
“Debt-to-GDP was at a generation low in the Volcker era,” Dwyer said. “So, debt to GDP was nowhere near what it is today. We’re at a generation high at 138% debt-GDP. So, if you’re going to take a levered economy and shut it down, That’s not good.”