Vishweshwar Anantharam’s Post

The Fed tacitly announced QE via twist in its last FOMC by letting its maturing bonds run off, but reinvesting the principal maturities in its agency portfolio. The passive run off was meaningless in terms of duration and liquidity when there is so much surplus liquidity. But the active purchases which will now be almost 63 bps of GDP equivalent p.a , will continue to grease the asset markets and slow the pace of bear steepening. Add to it the reduction in taper to the tune of 420 bio. Incrementally the markets are getting 420 bio of liquidity and 180 bio of duration purchases p.a. The Fed will keep finding ways to stimulate even if they don’t cut rates. That is as bullish as the Yellen twist in Oct’23, if not more. SPX to 5400 https://lnkd.in/gNx3hUzJ

No major revelations out of today's Fed meeting, though there was some unexpected division. Even with a unanimous vote and 12 out of 18 FOMC members expecting another hike, there appeared to be some hand-wringing over where to go from here. As has been the theme, everyone agreed that with or without another hike, the higher-for-longer posture is the rule of the day. Of course, these minutes are a little stale as multiple officials have said since that the backup in yields is doing much of the Fed's lifting, making another hike essentially moot. Not much market reaction, except for another leg lower in the fed funds futures pricing of more hikes -- single digits for November, less than 1-in-3 for December.

Folks: I waited until the market fully digested yesterday's FED Meeting to say this: What will surely result in an over correction, Chairman Powell spoke about the institution as a place where expert policy meets reality. The press conference left me feeling that the FEDs united policy messaging was that they singlehandedly have saved the US Economy from the brink of recession. Whether FED Policy has saved our Economy or not, I leave to the historians, but I have to say: It certainly doesn't feel like the FED has done much in favor of the Housing Industry. In fact, the housing industry has been in deep recession for the longest period that any of us with 30-plus years of experience can recall. Regardless of where you are on the impact/outcome of FED actions, right and wrong policy will continue, as that's their job along with the positive spin to all FED actions. The really good news, the messaging outcome has the 10-Year Treasury back under a 4% handle, which means the market may be at long last baking in the reality of the FEDs absolute/resolute policy control. U.S. 10 Year Treasury Note: 3.858% Last Updated: Feb 1, 2024 3:41 PM EST

US Market Update - 02.07.2024 As the U.S. approaches the 4th of July holidays, expect the markets to trade on low volumes today. The next significant market movement is anticipated on Friday, given the limited activity due to the holiday. Today, all eyes are on Federal Reserve Chairman Jerome Powell as he speaks. Key points to watch: 1. Rate Cut Discussions: If Powell indicates an increase in the number of rate cuts this year, expect the markets to push higher. 2. Higher Rates for Longer: Should Powell emphasize that rates will remain elevated for an extended period, it would be wise to hedge portfolios. This stance could lead to a market correction after an initial upward move over the coming months. Disclaimer This blog post is for informational purposes only and does not constitute financial advice. Market conditions can change rapidly, and investments should be made based on individual risk tolerance and financial goals. Always consult with a professional financial advisor before making investment decisions. The information provided here is based on current market conditions and economic data, which are subject to change. The author is not responsible for any financial losses that may occur as a result of trading based on the information provided in this post. #TheFED #FED #FederalReserve #InterestRates #Inflation #MonetaryPolicy #FiscalPolicy #USmarket #SP500 #NYSE #Fundamental #Economics #BringTheBull #ZMC

Jackson Hole is upon us. This time last year Powell's speech spooked the market and sent it downward. Back then it appeared the markets suffered from wishful thinking. Some of that is present today, indicated by rate cut expectations next year. But we don't see that happening without some sort of negative economic or market stimulus. It's likely we hear much of the same from Powell: data driven decision making with rates staying high and possibly higher.

While the Federal Reserve was slow in recognizing persistent inflation and reacting to it, I wouldn’t “bet the farm” on the FOMC making a mistake in its efforts to rein in inflation too far causing a deflationary contraction. Yet, the risk for miscalculation is real. Using M2 and prepandemic monetary supply averages exclusively, the window for deflationary adjustment is becoming a bit narrower. The FOMC is $1.5-2 trillion way from “equalization” of monetary supply to prepandemic levels with prepandemic average monetary growth added. That said , expected demographic shifts in labor supply and consumption likely will lead to incremental contraction in economic performance as time progresses. As the information on this eventuality is incomplete, scattered in opinion of depth, quality, the impact is not quantifiable, nor identifiable.

Despite the recent #cpi report showing a slightly hotter number than expected, there is still reason for optimism. While we didn't hit the 2.9% year over year expected, the 12 month change has come down significantly from 6.4% to 3.1% (January 2023 vs January 2024). Although we still have work to do to reach the Federal Reserve's target of 2%, it's important to keep things in perspective. Even if the Fed doesn't cut rates in March and waits until May, we don't know how much that first cut will be, or subsequent cuts. The bottom line is, not everything is terrible. We may not see progress as quickly as we'd like, but we're still on the right track. What are your thoughts on the current economic situation? Let's start a conversation. #falbofinance #hpwealth

“Every FOMC Meeting Really is Live Now” In a meeting with something for everybody, when we demystify the dots of monetary morse code, it looks like the doves won the day.  While a hold was certainly consensus, many questioned the sentiment of Chairman Powell following a series of hotter than expected CPI prints. Powell downplayed this by claiming seasonal effects, and inflation being on a "bumpy road" back to 2%. Despite this, fears of imminent doom and gloom were put aside as 2024 remains in focus with three projected cuts with Powell seen as having retaken command of an off-course ship. However, not all that glitters is gold, with terminal rate projections rising on the back of one cut being removed in 2025 and a bit more in 2026. When searching for the justification, the answer is clear in solid economic growth and rising inflation projections. The all-important Core-PCE projections for 2024 increased from 2.4% to 2.6%. With the the intentions of the Fed being increasingly clear, investors are now focused on the “when” and the “how”. Still seeing 3 projected cuts for 2024 despite higher core-PCE projection indicates the desire to bring rates lower. As November’s elections loom nearer, the Fed’s independence risks criticism in the event of deviation or seemingly partisan alignments. As a result, with the June meeting coming clearly into focus, a path towards cuts every other meeting looks to be the base case. As Powell’s sentiment towards future cuts continues from his Joint Economic Committee meeting, central banks around the world may breathe a sigh of relief, empowering their own policy pivots. From Banxico looking to join their LATAM peers to G7 peers (Canada, New Zealand, ECB) with their eyes on easing, we have officially entered the next chapter of the economic cycle. #Fed #fixedincome #rates #cuts

Two days of testimony on the Hill for Fed Chairman Jerome Powell brought exactly what we thought it would…little new information. An entertaining effort by Senator Joe Kennedy aside, the two appearances in front of the House and Senate reinforced the message other Fed members have been saying these past few weeks. The one thing Powell did importantly articulate yesterday is that he is looking for the current pace of inflation to basically continue and with that the Fed gaining the confidence over a more elongated period to begin to move rates from the restrictive stance. It’s pertinent to note that the Fed isn’t necessarily waiting for 2% but for the current progress to continue. Powell also today said inflation is “not far” from where it needs to be for the central bank to start cutting interest rates. That’s known already with 20bps priced for June and additionally OIS markets looking for 87ish bps for the entirety of 2024, still rich for my liking. I remain in the 2-3 cut camp for 2024 as the Fed has to defend itself from the aggressive fiscal spending currently entrenched. This won’t be a quick rush to the exits for the Fed but they will be more mindful of the dual mandate of both lower prices and a still healthy job market. But the door remains clearly open for a June move should the data cooperate. The dollar has begun to respond to the weaker ISM data in the past week. Record equity prices have also responded to these moves. This trend could continue but will need help from the next round of data which includes NFP tomorrow and CPI/PPI/Retail Sales next week. The inflation data in particular of utmost importance. AHE should correct a bit tomorrow with a bounce back in the hours worked. Core CPI will have the most eyeballs focused after a perkier January number. It’s going to be important for the recent trends in FX, equities, and FI to see Core print more subdued this time around. A second upside surprise would ring some alarm bells. #cpi #nfp #usa #economy #federalreserve #fx #macro #trading #rates #equities #risk #inflation

November pause, secured ✅ Fed Chair Powell reiterated the Fed’s dovish message ahead of the blackout period. Due to unexpected risks, the FOMC is “proceeding carefully.”, he claimed. Commenting on the surge in bond yields, Powell said the Fed was “attentive” which could have “implications for the path of monetary policy”..👀 🧐Cautious messages from Fed officials in recent weeks demonstrate that the rise in borrowing costs and geopolitical escalations are shaping the FOMC’s mindset on further tightening. The risk of doing too much has increased considerably. ✔️A pause in November is now all but certain with markets pricing in over 95% probability of rates staying unchanged. The situation for December is less so, with odds staying at 65/35 in favour of no more tightening. 📉Equity markets were nevertheless hammered. Why? The same reasons really…higher borrowing costs are starting to bite, geopolitical uncertainty, energy prices spiking..I’ll leave you name the rest. #federalreserve #jeromepowell #interestrates #economy #equities #investing