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Hawkish Correction?
What a difference a few days makes.
Late last week, overzealous markets were so convinced of their own rate-cut narrative that traders summarily dismissed an upside surprise on headline US inflation to focus instead on the next day's producer price report -- on the way to pressing dovish Fed bets.
To be sure, it wasn't completely irrational. Core US inflation (i.e., what counts for the Fed, if not for Main Street, where the price of things like food and gas actually matters) matched expectat
One of these days, we may finally disabuse ourselves of notions of “historically” and other analogues in this post-pandemic era. Hopefully that happens before the next pandemic (or geopolitical shock).
I find it interesting that we’re talking about incremental rate cuts of less than 100 basis points and trying to read the tea leaves to divine the timing of those relatively small moves, but to me, it’s simple: invest in long-term bonds and wait for something that causes rates take the elevator down to the zero bound. Might be a month from now or 2 years from now, but 4% or 5% isn’t a horrible return in the meantime.
Granted, I’m a firm believer that rates are naturally headed to zero over time, and I suppose if you’re on Wall Street, you can’t always wait for the elevator.
I think you’ve alluded to it many times over the years…nobody knows what will happen in the future, with anything.