Everytime this happened, the Fed pivoted
2-year yield has now moved below the Fed funds rate pic.twitter.com/8fsrsDToh2
— Game of Trades (@GameofTrades_) March 17, 2023
Looks like my hunch was correct. This tweet was from Thursday, the day before #SVB failed. QE unofficially resumes on Monday. #Powell folded. The #Fed has pivoted. Americans will pay for this bailout with much higher #inflation. Buy #gold. t.co/MMd5xbMh6N
— Peter Schiff (@PeterSchiff) March 12, 2023
Inflation is still officially at 6% year-over-year and the Fed just pivoted their balance sheet strategy.
Now is a good time to start paying attention. pic.twitter.com/OzXlc69A3i
— Pomp 🌪 (@APompliano) March 16, 2023
It took the Fed exactly 1 week to undo 5 MONTHS of balance sheet reductions and tightening… Fed Assets:
- Nov 16, ’22: $8.625T
- Mar 8, ’23: $8.342T
- Mar 15, ’23: $8.639T
Not to mention that US bond yields have dropped sharply and most short-term notes (1- to 5-year ones) are back to roughly their November levels. The shorter notes have also dropped although less sharply. Source: www.wsj.com/market-data/bonds
What are we looking at here? I’ve seen articles saying that Goldman Sachs and friends speculate there won’t be a rate increase next week and, from the looks of it, that is the case. It doesn’t make sense to print $300 billion only to raise rates a few days later! Obviously, that puts the Fed in a very scary place and I honestly don’t envy Powell (although I’ll argue it’s their fault this is happening in the first place!) given that just a week ago he said they need to pick up the pace of rate increases because inflation was persistent.
I am personally smelling an imminent panic (likely leading to further losses), but weirdly enough Michael Burry(out of all people!) was hopeful: twitter.com/BurryArchive/status/1636028550708068353/photo/1. Still, I’m trying to stay away from most stocks and just stockpiling cash and going after my high-conviction stocks plus some gold and the world stock index as a bit of a hedge.
What do you think? Are we seeing rates rising or are the rate increases stopping next week?