“In fact it’s odd how fatalistic people seem to be. We used to furiously debate where and when we’d find the canary in the coal mine warning of an imminent market reversal to pounce on. Now, there seems to be blanket resignation that the trend is your master.”
Ok, so it’s Sunday which, as we’re fond of reminding you, means that tomorrow will be Monday – right up until Trump does something that takes the whole of idea of there being a “tomorrow” off the table…
Allison Nathan: Narayana, if inflation fails to accelerate from here, is there anything that would convince you that the Fed should get more hawkish?
Narayana Kocherlakota: No.
“Welcome to Japan”…
Markets will get a well-deserved break from scheduled event risks in the days ahead after traversing two consecutive weeks littered with every kind of conceivable land mine, from Comey, to elections in the UK, to a change in forward guidance from the ECB, to a Fed hike that turned out to be hawkish despite an…
“The bond market is speaking, but most aren’t listening. It is telling us that Yellen is tightening too quickly. Or at least, she is by no means anywhere near as easy as the popular narrative.”
“We now expect the FOMC statement to include a stronger acknowledgement of the recent soft inflation data, and our expectations for the Summary of Economic Projections have become incrementally more dovish.”
U.S. May CPI Fell 0.1%, Below Est.
U.S. May Retail Sales Fell 0.3% vs Est. Unchanged
They better figure out how to make this hike extra dovish.
“The economy may be doing fine and asset prices are roaring. As this column has discussed previously, inflation targeting is perhaps outdated monetary policy — but as long as that is still officially the goal, tightening tonight will soon be perceived as a potential mistake.”
Hopefully, the weekend gave you a chance to catch your breath after “Super Thursday.”
“But the inflation data has to be concerning, especially as long term inflation expectations have now completely retraced their post-election increase.”
“However, just like in the fairy tale, this perfect scenario is unlikely to last.”
“Any hint that targets are being abandoned or lowered would send a negative shockwave.”
“The last time volatility in the US bond market was this low (and complacency this high), 10y yields spiked up some 150bp in only four months as part of Bernanke’s ‘Taper Tantrum’. “