At the height of the Fed Piñata better known as QE, companies were borrowing obscene sums of money because it was cheap to do so. Leveraged deals were getting done in record numbers and the market loved it. But that’s over now. According to the Financial Times, not a single company has borrowed money this month, and that pretty much tells you what the confidence level is like on Wall Street.
The market is broken and I cannot overstate how bad things can get for the banking sector if growth projections continue to deteriorate. The consensus is that the Fed will increase rates by 25bps this week, but what investors want is a pause in rate hikes and a forecast revision for 2019. Anything less than that would be disastrous for the market.
Long: FAZ* and GE
*This is a small position that I intend to hold until Friday. This is a 3x inverse ETF which can turn against you with disastrous consequences.