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Why The Fed Will Be Forced To Halt QT Early And Expand The Balance Sheet In 2020, According To Morgan Stanley
The longer the current U.S. expansion drags on, and the more unapologetic Jerome Powell's Fed comes across, the more obsessed the market becomes with curve inversion.
And when I say "curve inversion", I mean "pick a curve, any curve." Swaps, corporates or the old standbys in the Treasury complex. It all works if you're running down stories. Anything to put the word "inverted" next to the word "curve" in a headline. "It's provocative. It gets the people goin'!"
On Thursday, Morgan Stanley is
Slightly off-piste but nonetheless still skiing down the same mountain, Gavekal came out with a note on Wednesday forecasting the onset of recession by 3/19. The call was based largely on global liquidity and trade indicators which, it claims, have a reasonable track record of misbehaving ahead of recessions. Bet Draghi is beginning to wonder whether his contract is 12 months too long. (And ‘no’, per your note earlier today he is NOT the world’s most competent central banker – whatever that might mean post-GFC; he’s the guy who broke the EZ sovereign bond market, and will be judged harshly by future historians of the EUR’s collapse – perhaps unduly harshly given its initial design flaws.)
Well done on the web redesign. Did you notice Jean-Claude was so drunk he had to be held up? http://www.dailymail.co.uk/news/article-5946491/Juncker-struggles-gala-leaders-step-help.html