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Not-So-Lonesome Doves.

If there was a message to be heard, it was received loud and clear.

Tuesday was the best day for US stocks since Jerome Powell figured out how to communicate with markets under the watchful eyes of Janet Yellen and Ben Bernanke in Atlanta back in January. Tuesday's surge was at least in part predicated on Powell being receptive to rate cuts. After all, what else can "we will act as appropriate to sustain the expansion" possibly mean under the current circumstances, right? Well, for one thing, Powell prefaced that with "as always", which kinda waters it down, and you should also note that the Fed chair threw in a caveat about bubbles. After noting that the Fed takes seriously the risk of consistently undershooting their inflation target, Powell cautioned that "using monetary policy to push sufficiently hard on labor markets to lift inflation could pose risks of destabilizing excesses in financial markets or elsewhere". Of course, he didn't say what "sufficiently hard" means, but the point is that the conference in Chicago is all about rethinking the Fed's monetary policy framework, with an emphasis on inflation, and right now, thanks in no small part to the trade war, rates markets are foaming at the mouth for cuts. Given that backdrop and the se
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3 comments on “Not-So-Lonesome Doves.

  1. Harvey Darrow Cotton says:

    What a beautifully written, intelligent, and prescient article, Mr. H. Kudos. The way Mr. Powell was able to FedCommunicate a dovish pivot without FedSpeaking a dovish pivot struck that perfect balance of outdoving the dovish expectations of the market without spooking doves who aren’t superdoves. The Fed will do whatever it takes to maintain asset inflation in the teeth of a wall of worries about China, Mexico, tech crunches, recession worries, or anything else that could prevent Trump’s second term or data-driven institutional independence with a poetic blend of blink and you will miss them winks, nods, smoke signals, and tics. The Fed squared the circle of Presidential incompetence, political and party corruption, donor-class instruction, and wage suppression with aplomb and without pushing buttons. I don’t know any ‘pros’, but I know they were impressed and I am now #LongBonds #LongHighYield.

  2. jyl says:

    Cuts in the Fed Funds rates may temporarily un-invert the 3m/10y. If the announced China + Mexico tariffs take effect, the negative impact on economic indicators, profit outlooks, and investor sentiment is unlikely to be eliminated by rate cuts alone. However, investors will also know that signs of movement toward trade deals – by either side – will trigger sharp rallies. There will be three puts to watch and everyone will be trying to figure out their level: the Trump put, the Xi put, and the AMLO put. Any guesses?

  3. Maggie says:

    This is 2000’s inversely inbred first cousin redux: there were a lot of death throes spikes on the way down. Hell, look at last autumn – a few similar lol “bull” spikes which were an alchemy of Fed fiat/Powell propaganda & buyback Fluffer Boys churning the usual suspects (like Tesla, AMD, UA, FAANGMAN, etc. ad nauseum….). Bonds and oil/copper still not having it, saying “mmmm hmmmm… whatever you SAY.”

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