Join institutional investors, analysts and strategists from the world's largest banks: Subscribe today
Already have an account? log in
Why The Path To New S&P Records Goes Through Janet Yellen
There were some questions earlier this week about what I dubbed a "crash-up blueprint 2.0."
If you missed that article, I encourage you to read it, but here's the gist: In the event Treasury again announced less in the way of coupon supply than the market expects at the next refunding (i.e., a tilt towards bill issuance versus more bonds, similar to the November refunding), it could knock-on into risk assets in at least two ways.
I should note, quickly, that this is actually a hypothetical pos
Suppose Treasury issues less coupon, RRP is drained and Fed is compelled to end QT, so market gets (more) extended. Does that cause Fed to defer or cancel rate cuts?
The Fed (referring to FOMC collectively) has previously watched markets surge, without responding. Fed also sees the diminishing number of months between now and the pre-election “blackout” period. And I speculate that Fed really really wants to grease the soft landing, and is willing to take all of 2024 and most of 2025 to reach 2%.
I speculate that Fed will thus be driven by inflation and soft/hard landing data, rather than chasing FCI’s tail.
And I also think there is some degree of never-to-be-spoken political preference among some FOMC members. Powell is a Republican, but he surely doesn’t see Trump as any sort of kindred spirit.
if i understood correctly, if fed is forced to accelerate QT tapering, then its much less likely we will see fed rate drops?
sorry just saw John L’s comment, basically i think the same!!
I wonder what might be better or worse for Biden’s reelection chances — inflation near or even below target and a weaker stock market/economy, OR, inflation still significantly above target and a stronger stock market/economy. If those are the only two choices, I’m going with the latter, but to hear the Biden haters, you’d think inflation is always top of mind. But I agree with H’s take here that the price increases aren’t going to be given back, just slowed, and that’s not going to be enough to stop the complaining. So put that all together and I can see high for longer persisting + above target inflation + stronger market and economy is the best case scenario for Biden. The bitching about inflation, and immigration and Federal debt/deficit, will never end unless they somehow magically disappear anyway. So, little to be gained in making them a bit smaller, at least for the election’s sake.