I wrote family and friends yesterday that the Fed had finally started to come to understand that the markets were right. But only 24 hours later to see a hawk admit that we are stuck in a low growth, low inflation, low interest rate environment for the foreseeable future is still big news... and a big shock.
 
You know that...

• the Fed didn't want to admit its powerlessness to make the economy behave the way it wanted,
• wanted to control the market (and it will be interesting to see if and when an actual FREE market might rise out of the ashes),
• tried for years to make a liar out of the real, actual market by dissing gold/silver and pumping stock prices,
• head of the St. Louis Fed, James Bullard, was a Fed inflation "hawk" who didn't ever want to speak a discouraging word about equities.

 
BUT did you know that Bullard, on the heels of Wednesday's Fed decision that the "data" didn't permit a rate increase, admitted in a prepared statement that economic growth is sketchy at best, and that there's not much for stock bulls to look forward to for the next four years, and maybe much longer and that, indeed, the U.S. economy may not need more than a single additional rate hike in the next 2.5 years. I'll repeat that - Bullard thinks the Fed funds interest rate may go no higher than .63% by the end of 2019!

Lower for longer is exactly what he believes. The rate path "is essentially flat over the forecast horizon," Bullard wrote, with growth at around 2%, unemployment around 4.7%, and inflation remaining below the Fed's 2% goal. "On balance, real output growth, the unemployment rate, and inflation may be at or near mean values that could be sustained over the forecast horizon provided there are no major shocks to the economy." Bullard wrote.

As we have been pointing out for a while now, the markets have been saying this for a long time. A quick look at the 10 year yield is all that is needed - investors just don't see any future growth or accompanying inflation so we all should be prepared for lower rates and lower GDP growth here in the U.S. (and in the rest of the developed world).

There's no cheer in this for Wall Street or for private and institutional investors who had flocked to stocks as a last, high-risk hope of decent returns. It won't encourage Americans to buy more stocks or to keep the ones they have, so a sell-off is quite possible. His words will not be kind to the dollar, but should put shine on gold, silver, and mining.

All this may affect the maneuverings of the Presidential campaign. It certainly portends a major political challenge for whoever ends up in the White House. It may temper Congress's lust of spending. 
 
Bullard's underlying message is "Tighten your belt and secure the hatches. We've got to get back to reality" but, after years of heady QE, ZIRP, and NIRP, it won't be easy.