Lyin’ Eyes And Taper Tremors
Goldman's clients are asking how the onset of a Fed taper will affect equity markets.
This debate is -- how should I put this? -- impossible to resolve.
Harley Bassman captured it well in his open letter to the Fed this week. "Clever quants will say that a statistically significant mathematical correlation doesn't exist between money creation and financial asset prices," he wrote. "But who are you going to believe, them or your lying eyes?"
The reference, of course, was to the ubiquitous char
“ nothing to fear but fear itself“
There should also be a psychological aspect to inflation expectations.
If the Fed is ultimately forced to taper, it will be inflation that will do it. We don’t know how fast inflation expectations will move.
DBC, the commodity ETF, is up to 19.50 now from about 16 pre-pandemic. Crude oil is up to 74 right now, compared with about 60 pre-pandemic. Neither of those are earth shattering, but there is some inflation.
Nice work here.