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The Search For Peak Rates Continues
Have "oblivious" US equities finally woken up to what's going on in the rates complex and/or to the threat of a Fed wedded to a "higher for longer" policy bent?
Maybe. Maybe not. It's too early to say.
Breathless editorializing around losses for stocks early this week made for good headlines, but one down session doesn't do much (anything, really) to mitigate the myriad discrepancies skeptics see between rates and equities, and between earnings forecasts and the stormy outlook for margins.
Al
Increasingly I wonder why we think we are any better able to deal with inflation than they were in the 1970’s. Once it gets rolling, inflation always seems to beget more inflation. A good friend of mine–and a former economics teacher–shot down the “it will be different this time” argument almost the day the Fed began drastically cutting rates at the beginning of the pandemic. I thought he was overstating things then, but he seems to have been more right than wrong. (Yes, we had to act in order to deal with that crisis, but runaway inflation was always a risk.) It is not hard to imagine another batch of bad numbers pushing terminal rate projections to 6% or beyond.