Operating at the Intersection of Technology and the Capital Markets
Tag: fed funds rate
The Fed will prop up the banking sector with lower rates. Our view is that the Fed will lower its Fed Funds Rate by Labor Day. The only way to make the banking sector solvent is for the Fed to get its Fed Funds Rate down to where the banks can earn a net interest … Continue reading The Fed Will Prop Up The Banking Sector
Perhaps now the equity market understands that it would be impossible for the Fed to normalize rates if the central bank was to take rates back down to zero in short order due to the Banking crisis or for any other reason. Wednesday's FOMC projections show that the Fed plans to keep rates elevated and … Continue reading Now Maybe The Market Gets It?
I advocated for a 50 BPS increase by the Fed for its February FOMC meeting (it executed a 25 BPS increase). Perhaps the Fed will execute a 50 BPS increase in the Fed Funds rate when the FOMC meets on March 22nd. The current Fed Funds target range is 4.50-4.75%. With prices having accelerated sequentially … Continue reading A 50 BPS Increase In March
The 3.95% yield on the 10-Year Treasury is too low. The 10-Year Treasury yield assumes we are going back to a 0.00%-1.00% Fed Funds rate. We are not. We have far too much public debt ($31.5 Trillion) to encourage the type of debt issuance we experienced during COVID when the fiscal and monetary sides lost … Continue reading 10-Year Treasury Yield Has Upside
The Fed essentially did nothing this past week in terms of tightening the money supply. QT hasn't been nearly as aggressive as the Fed's QE efforts - especially when you consider the cumulative effect of QE from 2009-early 2022. This Fed's ideology is not aligned with getting CPI down to 2% as I wrote back … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
Regardless of where CPI lands tomorrow, my view is that the Fed will hold rates higher for longer than the market believes. Higher interest rates combined with a shrinking money supply (QT), translates to: tighter monetary conditions, a higher cost of capital, less revenue visibility for companies, more employee layoffs and a deeper recession. The … Continue reading Tomorrow’s CPI = Noise
The Fed will likely hike by 25 BPS today (although we hope for 50 BPS). On the subject of a Fed pivot, market commentators seemingly always neglect to mention the QT component. QT is a more powerful monetary policy tool than is the Fed Funds rate in our view. Banks can't lend a Dollar that … Continue reading A Full Fed Pivot
The sooner the Fed gets to where it is going, the sooner it may pause and observe. In addition, Treasury yields remain negative across the yield curve which is not long-term healthy for the economy. The Effective Fed Funds rate range stands at 4.25-4.50%. If the Fed believes that the upper bound should sit at … Continue reading Why The Fed Should Hike By 50 BPS
The NASDAQ Composite has had a nice little run, up more than 9% year-to-date. However, I would exercise caution ahead of Tech earnings and the Fed's January 31st / February 1st FOMC meeting. We have written on numerous occasions that we expect management teams to take a conservative approach to 2023 Revenue and EPS guidance. … Continue reading Technology Stocks Are Not Yet In The Clear
Headline CPI came in at 6.5% year-over-year and down -0.1% for the month of December. Core CPI was up 5.7% year-over-year and up 0.3% for December, up from 0.2% in November. Readers know how we feel about price inflation - it is higher than what the government reports. Take "eggs" for example which we recently … Continue reading CPI: A Long Way To Go To 2%
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