- Investors aren’t paying enough attention to the risk of quantitative easing, Art Cashin told CNBC.
- While markets are focused on benchmark rates, the Fed has been slowly shrinking its balance sheet.
- Meanwhile, the Bank of Japan could signal a big shift soon that would also send yields higher.
Wall Street legend Art Cashin is cautioning markets to keep a close eye on the the Federal Reserve’s quantitative tightening and a possible reversal from the Bank of Japan.
With Japan’s central bank due to meet in the coming week, a shift toward a more hawkish stance would add upward pressure on bond yields, hitting stocks in the process.
“The Fed has stopped being an aggressive buyer of US Treasuries. And if the Japanese people stop being an aggressive buyer, that’s going to force rates and yields higher too,” Cashin, UBS’ director of floor operations, told CNBC on Friday.
ODTE worries: The fear is a self-reinforcing downward spiral that rocks the entire market, creating an event risk similar to 2018’s volatility implosion.
(Bloomberg) — It’s a time-honored tale. A new force enters the market — quantitative easing, leveraged ETFs, high-frequency trading — and a cottage industry on Wall Street is born devoted to exposing the risks it supposedly poses for investors.
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