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Goldman Sachs sent reassurance pills to the market before the Fed's most popular inflation indicator was released: it rose in the first quarter, then continued to cool down
Goldman Sachs anticipates that the inflation index most favored by Federal Reserve officials — that is, the core PCE inflation index that excludes highly volatile food and energy components — may rise slightly in the first quarter of 2024, but will continue to decline for the rest of the year.
Zhitong FinanceApr 23 10:07 ET
BlackRock's Rieder Envisions Two Fed Rate Cuts This Year
BlackRock CIO of of global fixed income Rick Rieder says BlackRock has cut its own interest-rate exposure, weighting investments more to shorter maturities, and envisions the Fed being able to lower interest rates twice this year as inflation moderates in the months ahead. He speaks with Katie Greifeld, Tim Stenovec and Eric Balchunas on "ETF IQ."
BloombergApr 23 03:41 ET
Stop staring at the point where the Fed cuts interest rates; is liquidity the weather vane?
Michael Howell, author of the book “Capital Wars,” believes that the international financial system has been transformed into a system that serves “debt refinancing,” and the traditional view that interest rates are the main driver of the economic cycle may be wrong.
wallstreetcnApr 22 18:57 ET
Markets Will Struggle Going Forward, 22V's DeBusschere Says
Dennis DeBusschere, 22V Research president and chief market strategist, says earnings are strong and improving but expectations are a little high amid the current inflation environment on Bloomberg Television.
BloombergApr 22 04:11 ET
The “haze” of US stock shortfalls has not dissipated, and “bottoming out” is still risky
The US stock market experienced a sharp correction for the first time in six months, so should we buy on dips now or just wait and see the changes?
Zhitong FinanceApr 22 03:32 ET
Will US stocks be saved this week? The Federal Reserve's “favorite” inflation index, tech giants' earnings reports are coming
The Federal Reserve's favorite inflation measure and earnings reports from big tech companies are coming this week.
Zhitong FinanceApr 21 21:18 ET
BelleWeather :
I think proper portfolio positioning vis a vis inflation is important. The concern I have is stagflation, so I’m trying to be defensive to that. This is difficult. And timing the market is impossible and crazy-making, so I personally am taking each day as it comes.
I don’t think anyone is going to sell off over these concerns, and Powell is not about to fan those flames either!
SpyderCallOP BelleWeather: They might not sell over these concerns. But when these variables are present, then any negative catalyst will likely catalyze a selloff. For example, if we get bad rhetoric from Powell next week, then we might see extra volatility. That being said, in the current environment, any selloff will be a good buying opportunity until something breaks in the economy.
SpyderCallOP BelleWeather: So far, wages and employment numbers have held up, so stagflation is not a concern until inflation picks back up. With the way oil and gasoline prices have been climbing, we could possibly see a stagflationary environment soon, but not yet. Things are almost perfect in the economic data currently. We are in a goldilocks zone for the Fed right now. And if things get worse, then the Fed has already mentioned cutting rates. That would be even more accomodative for equities as the "Fed Put" will be in play at that point. So, if we do see stagflation, it shouldn't last long as the Fed will accommodate markets when the inflation, wages, or employment situation changes negatively.
BelleWeather : Agreed on the Goldilocks zone vis a vis the Fed mandate save one issue - the reserve bank balance is almost out - won’t they have to move to correct that?
SpyderCallOP BelleWeather:
They have been greatly decreasing the balance sheet since march 2022. This is done through selling treasury bonds or mortgage securities. Short-term treasuries, like bills, have been the biggest culprits for the runoff of the balance sheet. This has been unwinding the massive amount of asset purchases since the 2008 financial crisis.
They purchased all of these assets back then as a form of quantative easing to boost the economy. Right now, they are selling treasury notes at sky-high yields to provide liquidity to banks essentially. This is putting more liabilities onto the balance sheet, which brings the balance down.
I don't think the balance sheet runoff is such a big deal at the moment.
Once the economy is showing signs of trouble, then I think we will need to worry about the Fed balance sheet. If they start buying assets, essentially quantative easing, then they might think that there is weakness in the economy.
You might think that with the Fed balance falling like it is, then long-term treasuries should be falling along with the balance. But that has not been the case since last November as these treasuries have been climbing.
This tells me that the balance sheet is now falling because the Fed is adding liquidity through short-term bond sales, which inject liquidity into the economy, which is good for an economy and equities.