Next rate hike will spark 'dangerous game' with state of economy, investor Peter Boockvar warns

The market's reaction to higher-than- expected inflation may lead to more losses.

Peter Boockvar thinks Wall Street is coming to grips with the fact that inflation isn't going away.

We're going to start playing a dangerous game with the economy after the rate hike. According to the Bleakley Advisory Group chief investment officer, the Fed funds rate is going to exceed the prior peak in a rate hiking cycle for the second time in 40 years. We are getting into difficult waters.

Despite signs of softer commodity prices and used car prices slowing down, Boockvar says a 1/3 point hike at next week's Fed meeting is almost done.

The bureau of labor statistics lags in how it captures that. Boockvar said that there is a two-lane highway with both sides going in the opposite direction. In the four days leading up to Tuesday, the markets rallied 200 S&P points because the BLS hasn't yet captured that. The Fed is lagging when it comes to how they're reacting to events. They drive with a rear-view mirror mentality.

The major indexes fell to June 2020 lows after the August consumer price index. Shelter, food and medical care costs went up even though gasoline prices fell. The index was thought to fall by a small amount.

The rate hike forecast was changed because of inflation. The Fed is expected to raise rates by a full point.

Boockvar does not think the Fed will go that far. He warns that investors will have to deal with the economic consequences of wealth destruction.

"If labor costs continue to rise at the same time the revenue side starts to slow, you're going to have further cuts in earnings estimates at the same time." I don't believe the market ends with a multiple of 17x.

Boockvar thinks multiples will eventually be 15x or less.

Brian Kelly is a trader on CNBC and he sees more trouble for the economy and stock market.

The cracks in housing are barely visible. "As that starts to come down, people are going to feel like they have less money than they did before, and then we don't know what that will do to the economy." The 75basis point rate hike may be a mistake. There is a lag.

That could be too much for the economy to deal with.

Tim Seymour, a "Fast Money" trader, said that the market was turned into a convulsion by the Federal Reserve's inability to raise interest rates. We were not able to raise rates even in good times.

There is a Fed meeting in September.