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That Was “Easily The Most Hawkish” Yellen We’ve Ever Seen

"Yellen’s remarks in Senate testimony were the trigger point for a market that may have been short dollars, a trader in London said, while Amherst Pierpont’s Stephen Stanley described them as 'easily the most hawkish message' that she has delivered as Fed chair."

  Well, on Tuesday we got a taste of what Albert Edwards warned us about last week. We did indeed get hawkish Yellen - much to everyone's surprise - which added fuel to the reflation fire that was rekindled last Thursday with Trump's "phenomenal" tax plan rhetoric. Have a look at the reflation trinity: I think it's important that investors recognize something that happened this morning. Have a look at the market action right around the time Yellen's prepared remarks hit the wires: See how stocks weren't really feeling the love as much as the dollar and yields? Yeah, that's a preview of what happens when stock/bond return correlations flip positive from a monetary policy shock. Recall that you want a negative stock/bond return correlation or, alternatively, a positive rates/stock correlation. That is, you want stocks and bonds to move in opposite directions. That way, you can diversify. What you don't want, is for stocks to lag or worse, fall when bonds fall/yields rise. That's when you get taper tantrums. https://twitter.com/heisenbergrpt/status/831527525515931649 Clearly stocks caught up today. But remember that I flagged this, because you can bet I'll be referr
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