Market expert warns Fed will ‘crush’ US housing in ‘decade-long fallout’ from rate hikes
The Fed needs ‘long period of time’ to reach inflation target, ProChain Capital president says
Fed rate hikes will eventually 'crush' housing, 'interest rate-sensitive' markets: David Tawil
ProChain President David Tawil explains why he predicts rate hikes are on the horizon and likely to stay high 'for a number of years.'
Though the Federal Reserve paused rate hikes in its last meeting, one market expert warned that the U.S. economy faces a long inflation fight.
"I don't think that the Fed is going to go ahead and get to its inflation targets very soon. I think it is going to take a long period of time," ProChain Capital President David Tawil said on "Mornings with Maria" Friday.
"Relative to the markets, I don't think that's wrong. The markets have been able to take this in stride," he continued. "It is going to crush some very interest-rate sensitive industries such as real estate, and I think we're going to see a multi-year, maybe decade-long fallout, first on commercial, and then we will eventually get to housing."
Tawil’s comments come just days after nearly all Fed officials signaled during their June policy-setting meeting that additional interest rates are likely this year amid signs of sticky core inflation within the economy.
Minutes from the U.S. central bank's June 13-14 meeting released Wednesday showed that some policymakers voiced support for raising rates in June, although officials ultimately held them steady – and that many are open to lifting them again this year.
Predicting the Federal Reserve will raise rates by at least 100 basis points, ProChain Capital President David Tawil cautioned the hikes will eventually "crush" housing and "very interest rate-sensitive" markets on "Mornings with Maria" Friday. (Getty Images)
The market expert predicted rates will see another 100 basis-point increase and stay that high "for a number of years," and echoed other analysts’ real estate warnings.
"There will be a fallout. Housing has been incredibly strong despite all of the turmoil going on with respect to rates, with respect to pulling in of the economy," Tawil explained. "And so therefore, I believe that there are certain sectors that you need to go ahead and focus on."
"I think tech will continue to remain strong," he added, "housing and other interest rate-sensitive industries are going to go ahead and lag."
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Tawil also pointed out a shift to watch within the U.S. labor market as workers pull back on job hopping or quitting.
The June jobs report is projected to show that hiring increased by 225,000 jobs last month, marking a drop from the 339,000 in May and the 290,000 monthly average recorded over the previous six months.
"Quitting the quit certainly makes sense. In addition, a lot of white-collar jobs have started to take back the remote work option. And so people that were looking to go ahead and continue what was a pandemic luxury of being able to work remotely, fairly often, if not exclusively, has also gone away," Tawil said while also noting the swath of sign-on bonuses have disappeared.
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With higher rates and a potentially weakening labor force, the Fed’s economists have maintained that a mild recession is likely to begin later this year.
However, they suggested that it is possible the economy averts a downturn with "a moderately paced recovery," a change from their prediction earlier this year.
FOX Business’ Megan Henney contributed to this report.