Who Are You, And What’ve You Done With The Fed?

Who Are You, And What’ve You Done With The Fed?

Try as US policymakers might to disabuse traders of the notion that peak Fed funds will be followed by outright easing in relatively short order, the market will almost surely continue to assign some probability to rate cuts in the back half of 2023. It's the legacy of a Fed that spent most of the last four decades in growth-conscious mode, yes, but more than that, it's extreme recency bias on the part of market participants, many of whom have never known anything other than a Fed that's protec
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5 thoughts on “Who Are You, And What’ve You Done With The Fed?

  1. It depends what the economy does. If inflation cools quickly and the economy slows down rapidly they will cut rates quickly. If the economy stays perky or at least positive/flat and inflation stays up, they will keep rates up or even raise them a bit. It’s scenario 3 where you could see a change. A slowdown with some remaining inflation- that would be a change. Most likely there will be no cuts at the terminal rate at least not quickly. That will throw the kids off. I don’t see that as the most likely situation though.

  2. H-Man, if history serves me correctly when Lehman crashed you were smoking a Marlboro at a friends apartment and thinking mutual funds might be a good investment. Memory could be foggy from a post eons ago.

  3. QT is actually quite slow.

    QE at the time of COVID was 4 trillion in one year.

    QT right now is only $100 billion per month.

    In other words, QT is actually 3.5 times slower than QE.

    No wonder the market is laughing at the Fed.

    How high would long-term interest rates go, if the Fed was tightening as fast as they had lowered?

    As a bear, I’m not asking for that much.

    Just get us back to the pre-COVID highs.

    Is SPX 3200 too much to ask?

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