Ok, it’s Sunday evening at HR, and you know what that means…
“But, hey, we’re hitting our numbers just fine as it stands and, if you hadn’t noticed, our stock price hit a new high yesterday. Why mess up a good thing?”
“The only thing it will accomplish is forcing, as well as encouraging, investors to carry on with the types of trades every right-minded observer thinks has a large element of recklessness.”
All told, the mood remains “risk-on.”
“This episode provides a good example of just how difficult the eventual path to policy normalization is going to be.”
The message is loud and fucking clear: the vol. seller’s/ carry trader’s paradise and the risk party that’s made every homegamer with some SPY and QQQ look like a guru for the past eight years depends on DM central bankers staying some modicum of dovish. And on that score, bad data helps.
“This puts the Fed in a terrible place”…
“But it is not true that the Fed is hiking to address vulnerabilities in the financial system or “pop” asset bubbles.”
“Guess what people immediately did? Why, they fled to the “safety” of overvalued, high-flying tech stocks, that’s what they did.”
CPI unchanged vs est. 0.1%, according to the BLS.
Ex. food, energy up 0.1% vs est. 0.2%
“And now? Dovish Fed speak, wavering ECB leaks, resolute BOJ actions, completely mixed emotions from the BOE and suddenly it doesn’t feel nearly as fun.”
So yeah, another day, another largely fruitless effort to figure out what exactly the message is from DM central bankers. Yellen was, well, Yellen, and her second day on Capitol Hill brought little in the way of surprises although there was this: It is premature to conclude the underlying inflation trend is falling well short…
“But they seem to cling to the notion that they must do so without any knock-on effects to the broader category of assets. They do so love the calming sounds from the trickle-down effect.”
“This Fed transparency has become more of a liability than an asset. Instead of providing policy clarity, it creates confusion as various factions of the Federal Reserve board debate their positions in a public forum.’
Well, the message from Yellen was heard loud and clear and amusingly, so was the message from Stephen Poloz. In fact, you’d be forgiven for thinking they coordinated to make sure one offset the other. The BoC hiked, as expected, but “expected” is a relative term here. Because the whole abrupt shift in rhetoric that culminated…