All Else Equal

All Else Equal

Lost in the cacophony of apocalyptic Fed pontificating is one simple reality: Financial conditions have never been easier. The proximate cause of recent consternation across risk assets is the surge in US real rates, which Goldman's David Kostin described as "stunning" in his latest missive. There was some relief on Friday. 10-year reals fell 9bps, but remained 45bps less negative than they were at the end of last year. That represents a significant tightening impulse. Relatively heavy losses
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2 thoughts on “All Else Equal

  1. Financial conditions don’t matter and interest rates sure as hell don’t matter. The only thing that matters is money printing (you’ve repeatedly posted that beautiful graph of the Fed balance sheet versus S&P). Since the Fed will continue printing till the end of this quarter, just a month ago gurus were predicting that the market will rise in Q1 and struggle afterwards. What we’re learning is that what’s relevant is the change in the rate of printing. That went negative in December. Apparently pumping money into the market at merely a diminishing rate is enough to crash it. If stocks need to reconnect with fundamentals, the fall has a long way to go. I don’t see value investors stepping in to buy Tesla anytime soon.

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