Something’s Going To Break
The worst bond selloff on record accelerated Wednesday, with the usual caveat that the move was vulnerable to being faded over the US session, especially considering the presence of a tradable event (the March Fed minutes).
Notwithstanding the potential for any "buy the news" trade on the minutes, global yields pushed higher on the heels of remarks from Lael Brainard, who emphasized US policymakers' determination to proceed with what she described as "methodical" rate hikes and "rapid" balance
I hope you all enjoyed Bill Dudley’s interview on Bloomberg TV this morning. He explicitly stated that Fed policies would send stocks “much lower” and bond yields ‘much higher”.
He also explicitly said that the Fed is targeting wage growth. The last question was why current and former Fed officials were so quiet about this goal, he answered something like “no one wants to say they are trying to keep wages from rising.”
A quick survey of the biographies of the loudest proponents of a rapid removal of stimulus at the Fed reveals zero.zero private sector experience. None.
How can we expect them to understand the tangled web of financial engineering that will unravel as interest rates rise much higher? Even Alan Greenspan, who claimed to be a great student of the markets, allowed investment banks to increase their leverage to 40 times. Remember that? That surely helped usher in the GFC a few years later.
If only I were wired to be a trader and not a LT investor….. I am destined to ride out yet another harrowing roller coaster ride.
I am not selling (in spite of alarm bells going off) because I won’t know when to get back in. No big purchases for me in 2022.
Are you there, Jerome? It’s me, Emptynester.
I can only say that circumstances, and the actions of Jerome Powell to date as Fed chair, do not inspire my confidence. I don’t imagine we’ll be able to shake off the effects of Jerome Powell’s leadership until late next year or early 2024. If I were Joe Biden, I’d fire Powell in 2023. Powell can take the blame for the errors of his ways while leading the Fed. And I cannot be sorry to see him go. By firing him, Biden will stand up for his constituents, who will be in a sour mood from months of inflation and economic impacts from the war with Russia, which we hope (Please!) will be resolved by then.