Operating at the Intersection of Technology and the Capital Markets
Tag: Jerome Powell
I read through the Fed's 2022 bank "stress test" over lunch. It is almost comical how the Fed did not flex interest rates by more than 150 BPS in its Baseline and Severely Adverse scenarios. There really is no logical reason for not running various modeling scenarios that would see rates climb by 1,000 BPS … Continue reading The Fed’s Bank Stress Tests
The Fed is already doing back door Quantitative Easing (QE) as a result of weakness in the Banking sector. What if CRE defaults were to accelerate? With high Office vacancy rates and $3.6 Trillion in CRE debt outstanding, there ought to be plenty more defaults in 2023. Earlier this month Blackstone defaulted on $562 million … Continue reading CRE Debt To Break The Fed?
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 would advise the Fed against pausing QT, but perhaps the central bank will pause QT this summer as part of raising the debt ceiling. By "pause" I mean the following: Congress will lift the debt limit this summer (it is not a question of "if" but "when"). Once the debt limit is lifted, Treasury … Continue reading QT Pause This Summer As Part Of Debt Deal?
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
Our view is that it will be difficult for the Fed to take a dovish position with CPI above 7% given a CPI target of 2%. Further, the entire Treasury yield curve remains in negative territory. Recall that Powell wants to see positive real rates across the yield curve as he said in his September … Continue reading The Fed Can’t Afford To Be Dovish
The Fed reduced its Treasury and Government Agency security holdings by $32.9 billion over the week ended November 30th. The Fed has reduced its balance sheet holdings by $79.7 billion over the last 4 weeks. Fed Balance Sheet – Treasuries: The Fed’s Treasury security holdings were $19.6 billion lower over the last week and $60.0 … Continue reading The Fed’s Balance Sheet Reduction (QT) Update
"Did Powell just say that the pace of Fed Funds Rate increases may slow? Let's run stocks higher through year-end, fundamentals be damned!" I've never seen a more lazy equity market in my life. Fundamentals have not mattered since the COVID lockdowns and Fed policy matters far too much. The market is to blame as … Continue reading Stocks To The Moon, Fundamentals Be Damned
More than 24,000 Technology sector employees have been laid off month-to-date making November the worst month of the year for layoffs as Technology companies prepare 2023 budgets. Q4 2022 could rival Q2 2020 when more than 60,000 Technology sector employees were laid off. Q4 2022 is tracking at approximately 37,000 Technology sector employee layoffs. Our … Continue reading Tech Layoffs Are Spiking
The Bank of England expanded the scope of its bond-buying program by purchasing inflation-linked Gilts. Our view is that the BoE will stay in the bond market somewhat permanently and will ignore its self-imposed QE deadline of October 14th. Our view is that the U.K. will be dealing with Stagflation for years to come given … Continue reading BoE Foreshadowing The Fed?
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