Tuesday , January 31 2023
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Tag Archives: Monetary Policy

Weekly Market Pulse: The Consensus Will Be Wrong

What’s your outlook for this year? I’ve heard that question repeatedly over the last month and if you’re reading this hoping I’ll let you have a peak at my crystal ball, you’re going to be disappointed. Because I don’t have a crystal ball and neither, I hasten to add, does anyone else in this business. So, no, I don’t know what’s going to happen this year. I do know what the consensus view is, what the majority expects to happen, and that may be more useful. Because...

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Weekly Market Pulse: Good News, Bad News

One thing I can tell you for certain about last week’s big rally on Thursday and Friday: there were a lot of people who desperately wanted a good excuse to buy stocks. And buy they did after a better-than-expected CPI report Thursday morning, pushing the S&P 500 up nearly 6% on the week with all of that coming on Thursday and Friday. The same could be said of bonds which also had a good week, with the aggregate index up 2.3%. The stock market rally probably says...

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“The Swiss National Bank in Brief”

PDF. Contents The SNB’s mandate Monetary policy strategy Implementation of monetary policy Ensuring the supply and distribution of cash The SNB’s role in the cashless payment system Asset management The SNB’s contribution to financial stability International monetary cooperation Independence, accountability and relationship with the Confederation The SNB as a company Legal basis Appendix Publications and other resources SNB balance sheet Addresses

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Weekly Market Pulse: The Real Reason The Fed Should Pause

The Federal Reserve has been on a mission lately to make sure everyone knows they are serious about killing the inflation they created. Over the last two weeks, Federal Reserve officials delivered 37 speeches, all of the speakers competing to see who could be the most hawkish. Interest rates are going up they said, no matter how much it hurts, no matter how many people have to be put on the unemployment line, because that’s the only way to kill this inflation, to...

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Weekly Market Pulse: Peak Pessimism?

Goodbye and good riddance to the third quarter of 2022. That was one of the wildest 3 months I’ve experienced in my 40 years of trading and investing. The quarter started off great with the S&P 500 rising 14% from July 1 to August 16 but ended with a 17% swan dive into the end of the quarter. And we closed on the low of the year. The 10-year Treasury yield rose from 2.97% to 4% just a few days before the end of the quarter. The 3-7 year Treasury index – our...

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Monetary Policy, the NK Model, and Humility

In an NBER working paper John Cochrane concludes that … we have been guilty of playing with too-complex models when we don’t really understand basics, such as stability, determinacy, and the frictionless limit. … Given the state of actual agreed-on knowledge, central banks’ proclamations of detailed technocratic ability to manipulate delicate frictions is laughable. Figure 10 shows in chart form the Rube-Goldberg list of mechanisms the ECB thinks it understands and can manipulate....

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No One Wants a Recession, but Central Banks are willing to Take the Risk to Demonstrate Anti-Inflation Resolve

The week ahead is busy. Three G7 central banks meet, the Federal Reserve, the Bank of Japan, and the Bank of England. In addition, Japan and Canada report their latest CPI readings, and the flash September PMI are released.  There are three elements of the Fed's meeting that are worth previewing. First is the interest rate decision itself and the accompanying statement. Ironically, this seems to be the most straightforward. Even before the August CPI surprise, the...

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Weekly Market Pulse: The Dog That Didn’t Bark

Gregory (Scotland Yard detective): “Is there any other point to which you would wish to draw my attention?” Sherlock Holmes: “To the curious incident of the dog in the night-time.” Gregory: “The dog did nothing in the night-time.” Sherlock Holmes: “That was the curious incident.” From Silver Blaze by Arthur Conan Doyle, 1892 It is hard to determine sometimes what causes markets to move as they do. Take last Friday’s stock market selloff. The widely cited “reason”...

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Inflation is now out of the control of central banks

When “whatever it takes” means confiscation of wealth One of the reasons people decide to buy gold bullion or add silver coins to their portfolio is because they cannot be devalued. No one can suddenly decide to print more gold or silver! Sadly, this is exactly what happens with currencies around the world. And the last two decades have been prime examples of this. As governments rush to patch up past mistakes, missed warnings and election cycles they resort to...

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The End Game Approaches

The pendulum of market sentiment swings dramatically.  It has swung from nearly everyone and their sister complaining that the Federal Reserve was lagging behind the surge in prices to fear of a recession.  On June 15, at the conclusion of the last FOMC meeting, the swaps market priced in a 4.60% terminal Fed funds rate.  That seemed like a stretch, given the headwinds the economy faces that include fiscal policy and an energy and food price shock on top of monetary...

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