One Bank Sees ‘Likely Collision’ Between Powell, Stocks
The Fed "has a lot of wood to chop if they're serious about removing the punch bowl," Morgan Stanley's Mike Wilson said, mixing metaphors in a Monday note.
One of the most vexing issues facing market participants at the current juncture is the idea that the Fed waited too long to normalize policy and as such is destined to exacerbate downward pressure on the US economy exerted by, for example, a waning consumption impulse as Americans grapple with surging costs for food and energy.
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We will see. I just don’t believe the Fed will be able to raise rates in an impactful way – let alone shrink the balance sheet- once it starts to get ugly out there in response to their actions. They have not even gotten to “Step 1”. Statistically, 70% of recovering alcoholics relapse during the first 5 years. Stress is generally the trigger. After 40 years of drinking juice, I have my doubts that collectively, as a country, we can stick to “no more juice”.
Abolish the Fed? Or keep it and use it to accomplish the financial goals of a select group of Americans?
What a mess.
Looking through the “risk management lens”, what’s the biggest potential problem right now? (1) A reduction in Real GDP growth, (2) An increase in the Unemployment Rate, or (3) A further acceleration of already-bad inflation to the upside ?
I believe it’s #3, which means you have to sacrifice a bit of #1 and #2 (…the mirror image of a few years ago, when they would gladly have traded a bit of inflation for more Real GDP growth).
In the 2-Year UST Yield chart, there is truth…
@PAK: You sir, must have retired with high rank from that elite special unit, Men That Stare At Charts.
Haven’t seen so much green on tradingeconomics.com bond 10yr cover sheet page in a long time. Clicked on the UST10yr link to open up the US treasury bond page and it was just as you prophesied. Am I looking at the awakening of a new Global Borg mind where the existential shock of pending food shortages, millions of refugees of all flesh tones on the move, simmering resentments fissuring old combatants into new larger realignments, the nascent realization that COP26 was just another pipe dream as climate change and war both push humanity back into the warm embrace of coal to cover heating and cooling demands? Top it off with the prospect of everyone watching everyone else’s plight on little screens Dr. Gerbils (or was it Dr. Goebbels? maybe it was Dr. Gerbils just in the boudoir? IDK) could only dream of, in real time, bonding all humanity together in one final death rattle? Look Mother at my extinction event selfie! … Then I remember to view the “All” data price line and I’m relieved to be reminded this is just the opening of yet another act in a long production yet to be played out.