No interest rate change….explaining the FOMC neutral “dovish” action and statements today

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I have been wrong at least as many times as I have been right when it comes to predicting the stock market… but I think this is interesting and hard to refuse.

1. No interest rate hike or cut today. No action anticipated for the rest of the year (until today they were expected to hike 1 or, less likely, 2 more times).

2. Powell said that the FED would stop selling securities held in its portfolio this September.

3. After the decision, the market ramped up and then dumped… likely in response to the yield curve inverting for treasuries up to 7 years out. But for certain the action was chaotic and absolutely unpredictable.

I think the FED is ramping up its short term sales of securities, perhaps even more than they have stated. Doing so allows them to stop selling sooner than expected (as Powell directly stated would happen in september- see #2 above) because the market has been inflating rapidly….
In other words, they can dump large volume and get more bang for their buck, and simultaneously act as a balancing force against the bubble going out of control and popping.

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I expect the market to drop, maybe not precipitously but relatively immediately, despite the fact that “on paper” the other evidence and factors points to the market continuing to boost higher for the foreseeable future.

I am actually willing to give the FED the benefit of the doubt. No matter what you think of them as good or evil… the fact is they want to keep the show going with stability, perpetually. It appears theyve learned and actually kindof knows what they are doing and not going to allow it to get out of hand like in 2000 and again leading up to the 2008 crisis. Think of it like poking a small hole in a balloon, not to pop it but to cause a leak, so that when the 10 year long bull market expansion starts to fade in the next 1-2 years… maybe it does so without doomy consequences.

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Tell me I am wrong. Maybe I won’t argue.

 

 

AC

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