SocGen super-bear Albert Edwards with the note:
The global reflation trade was already in retreat before the Fed lobbed in their surprisingly hawkish statement of intent last week. That retreat quickly turned into a rout across many asset classes. Whilst not in the league of the 2013 Bernanke ‘TaperTantrum’ it demonstrates the market’s sensitivity to the Fed’s intentions. To the surprise of many, the long end of the bond market rallied-in contrast to the sharp sell-off in 2013. Maybe it now realises that a Fed tightening cycle is nigh on impossible?
In May 2013, Fed Chair Bernanke adopted a more hawkish tone, causing major convulsions in the markets (known as the Taper Tantrum)–most particularly in the long end of the bond markets–which saw yields surge to 3% from under 2%. In contrast to 2013, the Fed’s recent hawkish turn last week catalysed a surprisingly strong rally at the long end.
