Things to ponder..

Here we are a couple of days after the FED Meeting, time to think things over. Here are some items that come to mind at the moment.

  1. A flattening yield curve is primarily a clue that the FED is not real serious in tackling embedded long-term inflation.
  2. Serious tackling of the 9.0 Trillion dollar FED balance sheet is key to the getting serious phase. The last time the FED tried to reduce Funny Money, they over 50 months reduced it by an average 15 billion per month.
  3. At the moment as we showed in a post last week, the market is pricing in 75 billion per month reduction in the balance sheet. Powell yesterday said that they would reduce at a faster rate than the 2015 to 2019 rate of reduction, but I doubt the FED is serious enough to reduce at 75 billion dollar monthly rate, maybe on a good day a 30 billion dollar per month rate.
  4. The fact that stock market pricing is not about the economy or earnings will be hammered home a second time as the economy runs into some headwinds.

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