Tag: quantitative easing

The NASDAQ Could Re-Test COVID Lows & The Rise of High Yield

The NASDAQ Could Re-Test COVID Lows & The Rise of High Yield

Could the NASDAQ re-test the COVID lows of March 2020 when it sat around 6,900? Yes. That would require a prolonged recession (which we expect) AND The Fed not restarting its ultra-dovish monetary policy of Quantitative Easing combined with a near zero Fed Funds Rate. Who knows how the Fed will behave in 2H 2023 … Continue reading The NASDAQ Could Re-Test COVID Lows & The Rise of High Yield

No QT as Far as The Eye Can See

No QT as Far as The Eye Can See

We wrote yesterday that we would be surprised if the Fed follows through on its stated plan to reduce its balance sheet by $95 billion per month as it seeks to unwind the heavy hand it played in 2020 and 2021 by subsidizing fiscal stimulus programs and executing its QE program. Robust Fed balance sheet … Continue reading No QT as Far as The Eye Can See

The Fed Should Focus On QT

The Fed Should Focus On QT

The Fed would be far more effective in controlling inflation if it were to pare its Balance Sheet versus focusing on the Fed Funds Rate. Inflation is created by excess money in the economy ("excess" money in that it is not generated from Production output but rather money printing by the Fed). The Fed could … Continue reading The Fed Should Focus On QT

We’ve Still Got A Long Long Way To Go

We’ve Still Got A Long Long Way To Go

"It would seem we've still got a long, long way to go" sang Phil Collins. I could not help but think of these lyrics as I reviewed the Fed's balance sheet this morning. While the Fed's Quantitative Tightening ("QT"), has only just begun, it has an enormous, multi-year project in front of it as it … Continue reading We’ve Still Got A Long Long Way To Go

Treasury Yields Will Only Move In One Direction

Treasury Yields Will Only Move In One Direction

10-year Treasury yields sit around 2.72% and will climb higher as the Fed: a.) lifts the Fed Funds Rate and, b.) trims its balance sheet (i.e. quantitative tightening "QT"). There is no scenario in which the Fed executes QT only to have Treasury yields move lower. It is simply a question of supply and demand. … Continue reading Treasury Yields Will Only Move In One Direction

A More Hawkish Fed Is Not In The Cards This Year

A More Hawkish Fed Is Not In The Cards This Year

The U.S. Just Passed $1.9 Trillion In Debt-Funded "Relief". Now Is Not The Time For The Fed To Raise Rates. Yield Curve Control Is On The Horizon. Some expect the Federal Reserve to become more hawkish in the near-term. We don't see it. Not with $1.9 Trillion in new Government debt. The Fed will eventually … Continue reading A More Hawkish Fed Is Not In The Cards This Year

The Fed’s Next Move Is To Ramp QE, Not Raise Rates.

The Fed’s Next Move Is To Ramp QE, Not Raise Rates.

We have said it on our TEK2day Podcast and in conversations with some of you that the Fed's next move is to accelerate its QE effort to control long bond yields. This may occur as soon as this month. An interest rate hike is not coming this year in our view. There is far too … Continue reading The Fed’s Next Move Is To Ramp QE, Not Raise Rates.

Near-Term Consumer Price Inflation Risk Is Likely Low

Near-Term Consumer Price Inflation Risk Is Likely Low

Despite a record increase in the Money Supply (M2) the U.S. economy likely will not experience near-term consumer price inflation given less than robust Personal Consumption. Further expansionary monetary policy will increase price inflation risk, particularly if Personal Consumption continues to rebound. This story is most efficiently told with pictures and captions. Click on any … Continue reading Near-Term Consumer Price Inflation Risk Is Likely Low

The Fed Is Crowding Out Private Capital<span class="badge-status" style="background:red">Premium</span> 

The Fed Is Crowding Out Private CapitalPremium 

The Federal Reserve is crowding out private capital. It has engaged in what feels like perpetual quantitative easing ("QE") since 2008. The Fed buying corporate credit is the latest perversion from this increasingly political institution. Federal Reserve assets continue to grow pushing against the $7 Trillion mark. Fed assets could potentially cross the $10 Trillion … Continue reading The Fed Is Crowding Out Private CapitalPremium