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Powell Gets Rally Fed May Live To Regret
In the wake of a very encouraging US CPI report, I suggested the Fed may be wary of any market reaction that has the effect of easing financial conditions.
Along with inflation itself, this dynamic was the bane of policymakers' existence last year.
At the first sign of progress, overzealous markets eager to trade less aggressive monetary policy would push the dollar and yields lower and stocks higher, at cross purposes with the Fed's inflation-fighting agenda. We're seeing a repeat of that cur
Like the balloons with the bull. If we get to 4,800 on S&P by the end of the month, you are going to need AI to figure out how the bull does a keg stand. Should be interesting what we see when we look back on New Years Day 2024.
Lots of navel gazing by the street. A slower growth trajectory gets rates lower and weakens the dollar. Its nice that Goldman’s financial conditions index is easy. But bank lending growth has halted and has begun declining. With a funds rate of 5.5% what incentives get banks to lend more with loan write offs and loss reserves increasing in cre, credit cards, personal loans, small business lending and car loans? Bank lending is where the rubber meets the road-sorry Goldman. The hand writing is on the wall.
You’ve always had a seemingly difficult time with that FCI gauge. It’s not a prediction or a forecast or an opinion, and it’s not from a Goldman note. It’s an index. It’s objective. You can pull it up for yourself on the terminal. It just is what it is. It’s based on a variety of inputs, none of which are subjective. It’s just numbers.
there was an article i think in wsj last week about a white paper the fed released with a new fci. it has the djia as part of the index. but the point was this new index de-emphasized equities and was tighter than the other models. i think people overestimate how much the fed cares about the stock market. only care to the extent that it impacts financial stability.