DXY faded a little.
AUD roared on the spot.
CNY faded.
Gold is going lower. Oil can’t even squeeze the shorts.
AI metals are the new gold.
RIO is the chosen one.
EM to the moon.
Junk needs to stay green.
Yields are melting except in Australia, where the RBA has dislocated the bond market.
Stocks know only one way.
It is tempting to say we are in a new market paradigm, if it were not for the obvious idiocy in doing so.
Relentless retail bid, tariffs leading to disinflation, yields down, AI everywhere, valuation metrics meaningless, sentiment terrible as prices reach for the stars.
A more reliable way of looking at is that the Fed is about to cut rates and end QT, which is a ringing bell to Pavlov’s dog. BNY.
- A quarter-point cut is almost guaranteed on Wednesday
- Forward guidance for December and beyond is likely to be limited owing to alack of data and considerable uncertainty about the outlook
- QT will likely also be suspended, given tightness and volatility in fundingmarkets as reserves continue to decline
…why then is the Fed cutting? It’s clear–despite a lack of official data–that the employment picture is troubling, with a lack of hiring even though layoffs–as far as we can measure–are not showing signs of picking up. Last month’s rate cut was characterized as a “risk management” move by Powell, given that “the labor market is really cooling off.” Indeed, and perhaps ironically, we think the lack of data over the past month would embolden the Fed to cut again, considering that the same risks are likely present.
I expect the backwards-looking RBA to be mugged by the same dynamic in due course, preventing the AUD from running wild.
Until then, up we go.
