This was the most surprising thing I read this morning…
Suffice to say, Treasury QE + possible rate cuts should be bullish for stonks, right?
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BMan,
Thanks for your very informative newsletter and thanks for this link. For anyone trying to open this without an account, I just clicked on the rectangular box up by the address bar an the whole article opened in a reader box. HTH…doc
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Which Browser are you using Doc? Do you have an extension you are using?
Andy
Andy,
Use Chrome, and the box that doc is referring to is here
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Thanks Beachman, that was very helpful!
Thank you Inspired.
Andy
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This article and “qe” is about bonds though.
Might just lead to being bullish for bonds and have no impact, or even negative rotational impact, on equities.
Dreamer
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Andy,
I’m using FF and the box is just to the right of the address bar…doc
edit: when I hover over the box, it says toggle reader view
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Thank you Doc I appreciate it.
Andy
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But, more fuel on the inflation fire, print money to buy up bonds. Meanwhile, FED is higher for longer to tame the inflation to an unlikely 2%. Take a listen to this from KBR:
Being pessimistic today,
KC
I think they are done raising interest rates. There will likely not be another hike in Nov and that takes us into Q1 2024 which is historically the slowest economic quarter…typically about 1/2 the growth rate of all the other quarters.
Why done raising rates?
Because we are already starting to feel the effects of one of the largest and quickest rate hike cycles in history. And it takes 1-2 years for effects to fully trickle into the economy. Rate hikes started in March 2022…that was 18 months ago. Housing market is feeling the pinch…this is one of the first sectors to be affected in a likely recession. Several other sectors are also undergoing recessionary conditions e.g. manufacturing, transportation, retail etc. This recession started in 2022, imo, and has been playing out in waves across different sectors are different times. It is a weird recession and this time is different…yes, every time is different because the macro conditions and events leading up to recession are always different. e.g. This 2022-2024 recession is the aftermath of a global pandemic that has not happened in a 100 years. Global populations, supply chains, technologies used in factories and businesses, automation levels etc are all different this time. Hence the economy will perform differently too…before, during and after this recession.
Now the FOMC has to monitor the economy to confirm the effects of their hikes and look for signs of further breaking.
Note the change: They are not looking for signs of exuberance…they are looking for signs of things breaking down. This is a change in mindset and focus which is trying to answer the question: When should they execute the first rate cut?
Higher oil prices will allow inflation to tick higher, but not enough for them to raise rates again. Oil bulls are a bit over optimistic these days. Demand side of the equation has changed and the OPEC+ has less control over prices. OPEC members are a loosely held cartel that say one thing and do other things. As prices rise, they will start pumping more to earn more…this has happened enough of times in history and this time is no different. And lets not forget that the US is the largest oil producer in the world!
One lesson from history that we should be aware of is that when rates go up rapidly, they ALWAYS come down rapidly as well. Rates have never come down slowly when they were raised higher and quicker. Therefore, the FOMC wanting to keep rates higher for longer may not be the way 2024 pans out…if they want to deliver against their dual mandate (control inflation and increase employment) while ensuring a soft landing of sorts.
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