DXY is consolidating for another push lower:
JPY was hammered. Why anybody thinks the BOJ is in a hurry to normalise rates is beyond me. That triggered AUD party time:
CNY is dead and buried:
Oil pumped on Houthis. Yawn:
Dirt yawn:
Miners a great short here:
EM lol:
Junk needs another leg up to carry the soft landing:
Yields down:
Stocks up:
Steven Blitz at TS Lombard captures the mood:
The story of 2024 was never going to be about real growth in the first place, but about the overall shift in Fed policy to “recession is not an option” and the subsequent impact.
On that note,stop worrying about whether the well-telegraphed gift Powell and his crew gave the markets on Dec 13 will still be with us after the holiday lights are taken down.
Powell will not turn into Grinch, quite the contrary. This Fed is quite okay with an off year for disinflationary progress if this means sustained growth.
The power of Powell’s gift resides in liquidity and stock market wealth and breadth, it is also what has made flipping the economy into recession so difficult.
It is hard to create a “Minsky moment” when building speculative leverage belongs to the central bank.
More to the point, each time in the past 18 months or so, when the equity market has been on the brink of a sustained bear market, the Fed responded.
This FOMC is not going to sacrifice household savings and faith in equities to the cause of reaching 2% inflation sooner rather than during some two-to-three-year time frame if recession can be avoided.
Today, they will ignore still high service inflation (with or without rent or medical services) while deflating goods prices pull total core inflation ever closerto 3%.
In the past ten years or so, equity and real estate have been a growing percentage of household net worth.
In the past, these two assets typically cycled against each other.
In this latest run-up of household liquidity from the 2020 and 2021 transfers underwritten by the Fed, real estate, and equities both jumped relative to net worth.
The equity share is as high as it’s been, and the real estate share is basically back to pre-GFC levels (Chart 1)–without a replay of the mortgage-mania era.
The punchbowl is being refilled. A new bubble is at hand.
AUD to party like a drunken sailor.
