Right, so the Fed is getting ready to announce balance sheet normalization. We previewed that last night.
Supposedly, the initial announcement won’t do anything to upset any apple carts because Janet is good a foreplay where “foreplay” of course means telegraphing what run-off is going to look like (what else would foreplay mean in that context?).
So there will be no tantrum, at least not immediately and everyone will focus on the committee’s assessment of the inflation outlook and that will be so carefully worded that it will bore people to tears and somehow, stocks will close higher on the day. That’s the plan for Wednesday. And you know what they say about “the best-laid plans”: they always work out just the way they’re supposed to (I think that’s how the old saying goes, but I could be wrong).
Anyway, people like pictures much better than they like words – just ask the folks charged with giving Donald Trump his intel briefings. So what we thought we’d do is show you the following two very simply visuals from Goldman which together serve as a kind of farewell homage to the Fed’s balance sheet as we prepare to watch it slide from 24% of GDP to 13% of GDP over four years.
Admittedly, there are some annoying words in these visuals, but the font is big and everything is rendered in aesthetically pleasing hues of blue for your viewing pleasure.
Nothing profound, just a retrospective as we wave goodbye to our $4.5 trillion friend…
[Goldman]
Anything on equity holdings?
I’m do not think that the FED ever bought US securities but I could be wrong.
doesn’t matter. it’s all tantamount to the same thing. when you create the circumstances under which investors have to chase down the quality ladder for yield, you might as well be buying equities. people abandon govies for corporate bonds, the yields on which fall which makes it doubly attractive for corporations to issue debt. there’s voracious demand and thanks to the voracious demand, borrowing costs are rock-bottom. then you take the proceeds from that debt and you plow it into buybacks.
what could go wrong?
i stole this sentence from Mr. H.–i simply could not think of anything to say but had to say something. kind of makes as much sense as this market we are all in.
0–just thought of something.
Quants away! run while you can!
that was pretty good.
sb
Looking at your fast facts it’s hard not to believe the Fed has really overdone it. The old problem of thinking if one pill will help us feel better, ten will really make us feel over the moon. Now they are hooked and there is no Fed rehab.