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The Art Of The Hawkish Step-Down
Jerome Powell's birthday is coming up. Upon ascending the Fed chairmanship in 2018, Powell was 65. He'll be 93 in February.
Or at least that's how it probably feels on some days for Powell who, during his tenure atop the Fed, has seen quite a lot. The market for VIX exchange-traded products imploded on his very first day in the big seat, and it's been a rollercoaster since. Powell labored beneath and through a trade war, shrill social media fault-finding by America's only twice-impeached presid
You nailed it.
Perfect….
I hope Mr. Powell is a subscriber. If not, maybe a freebie, Walt?
So, the bottom line is it doesn’t really matter what Powell says. What matters is what algos, CTA’s , etc. are smoking.
Seems to me that greed is always a longer term event than fear. Therefore, there may be some kind of sell-off at 2:00 Wed. followed by a big buy the dip rally the following days. Of course, he could say 50bps and then all bets are off.
I am sympathetic to those people in their 20’s and 30’s, who are trying to put together their lives in this inflationary and/or uncertain environment.
Yeah it’s pretty annoying
Yeah, 5% with a bit of inflation is a killer. When my wife and I were putting our lives together, we had to go through an oil embargo in 1973 where gas was not just expensive, it was rationed! You could only buy gas 3 days a week and only in the county you lived in. Travel was literally impossible. Inflation was so high Nixon enacted price controls and Volcker pushed the Fed rate to 18%! In 1982, my wife and I took every dime we had a built a house. Ours was the only residential building permit approved anywhere in the county that year. The upside was that there was so little work for contractors that we got amazing prices from those folks. The bad news was, we were broke when we got done. The other good news was that interest rates on Treasuries were very high and starting to fall … for the next 35 years. Bonds beat stocks for virtually the whole period. Boy, was I lucky.
If only higher inflation were as transitory as tighter financial conditions …
I anticipate the second hawkish step down might prove harder than the first, although stocks have soared enough to start the year that some profit taking following Fed day would make sense.
I read today that the top 100 corporate pension funds had the highest surplus in 20 years; they will probably put that surplus to work in the bond market as they like to lock in decent returns? Will that drive yields down, counter to what the Fed wants?