As I write this (Wednesday) the “markets” are all – once again – pegged at “never before seen in human history all-time highs.” To be clear: I am fully cognizant that the following is simply going to sound to a lot of readers, both old and new, as just another failed presumption in a long line of previously espoused failed presumptions.
Trust me – I get it.
However, with the above said, what I want to bring to your attention is the following that one truly needs to understand at a gut level to fully appreciate just how precariously poised these “markets” truly are, and just how quickly things can change. Need I remind anyone of just how quickly the “Bitcoin to the moon!” narrative fell back to Earth weeks ago?
As I laid out in my prior assertions, Mr. Powell was basically going to have to “walk on water” rather, than just do a bad interpretation of “two stepping” when it came to Federal Reserve policies going forward. That premise, in actuality, was spot on, only it happened a few days later rather, than at the presser.
The “markets” reacted negatively, to what by all accounts was, a hawkish (aka rate hiking biased) Dot Plot. Two members moved the chances for a rate hike far sooner than anyone in the Fed (especially the signalling via its Chair) ever contemplated.
Then, you started to get other members of the Fed (Mr. Bullard was one) going on the mainstream business/financial media outlets and professing the once unspoken notion that “They were now thoroughly thinking about thinking about raising rates.” And the “markets” began to falter. But then – they stopped. Why?
Hint: Mr Powell appeared in front of Congress a few days later and laid any notion of such an idea to waste.
Not only did he do this, but in what appeared to be more akin to synchronized swim team exhibition, so too, did other members of the FOMC, publicly and on the record.
The difference between this “aquatic ballet” and any that seemed to be flailing in the water on the business channels? Mr. Powell and the others are voting members for policy. The others are not. One can say anything they want, but unless you are a voting member? It’s all just gorilla-dust as the old saying goes.
Once Mr. Powell assured Wall Street that there was absolutely no possibility of a raising of rates without more lead time than a Saturn V rocket needs to go into production for a lunar launch – it’s been off-to-the-races every day since. For everything.
Again, why? It’s as easy and as trite as this…
To-day is the last day of the month and the quarter. Welcome to four times a year when they all align perfectly (FOMC decision, quarter end, month end) as to make normal window-dressing sessions look amateuristic in comparison the rest of the time.
That’s. It. Period.
Oh yes, and just to add one last thing…
Remember all that talk at this FOMC meeting, before and later, about the unusual activity that was taking place within the repo-markets (actually the reverse-repo) that was causing concern where the Fed said “It was all part of a normal process.” and they were fully cognizant of it?
That was when it was going up about $50 or $100 Billion a week and was closing in on a never before seen record of $500 Billion.
That worrisome new record has now been doubled in about a week and in now topping $1 Trillion.
But not too worry we’re told: They got this!
As always, we shall see.
© 2021 Mark St.Cyr
Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.