Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24
How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - 17th Feb 24
Why Rising Shipping Costs Won't Cause Inflation - 17th Feb 24
Intensive 6 Week Stock Market Elliott Wave Training Course - 17th Feb 24
INFLATION and the Stock Market Trend - 17th Feb 24
GameStop (GME): 88% Shellacking Yet No Lesson Learned - 17th Feb 24
Nick Millican Explains Real Estate Investment in a Changing World - 17th Feb 24
US Stock Market Addicted to Deficit Spending - 7th Feb 24
Stocks Bull Market Commands It All For Now - 7th Feb 24
Financial Markets Narrative Nonsense - 7th Feb 24
Gold Price Long-Term Outlook Could Not Look Better - 7th Feb 24
Stock Market QE4EVER - 7th Feb 24
Learn How to Accumulate and Distribute (Trim) Stock Positions to Maximise Profits - Investing 101 - 5th Feb 24
US Exponential Budget Deficit - 5th Feb 24
Gold Tipping Points That Investors Shouldn’t Miss - 5th Feb 24
Banking Crisis Quietly Brewing - 5th Feb 24
Stock Market Major Market lows by Calendar Month - 4th Feb 24
Gold Price’s Rally is Normal, but Is It Really Bullish? - 4th Feb 24
More Problems in US Regional Banking System: Where There's Fire There's Smoke - 4th Feb 24
New Hints of US Election Year Market Interventions & Turmoil - 4th Feb 24
Watch Consumer Spending to Know When the Fed Will Cut Interest Rates - 4th Feb 24
STOCK MARKET DISCOUNTING EVENTS BIG PICTURE - 31st Jan 24
Blue Skies Ahead As Stock Market Is Expected To Continue Much Higher - 31st Jan 24
What the Stock Market "Fear Index" VIX May Be Signaling - 31st Jan 24
Stock Market Trend Forecast Review - 31st Jan 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed Fold Under Pressure, Telegraphs Looser Money Ahead

Interest-Rates / US Interest Rates Jan 30, 2019 - 09:02 AM GMT

By: MoneyMetals

Interest-Rates

Two big questions have been front and center for Fed watchers in recent months...

The first is just how high rates could go before stimulus-addicted markets would falter. The second is whether our central bankers would bow to pressure once markets faltered and politicians began calling for the Fed to resume easy money policies.

Both questions now seem to have an answer.

They began to wonder in earnest if sky-high stock market valuations could be supported in an environment where Fed officials promised to keep rates moving even higher for the foreseeable future.


The equity markets spent most of the last quarter of the year puking and retching.

The second question was answered by the change in posture of bankers at the Fed and the apparent activities of the Working Group on Financial Markets, aka the Plunge Protection team.

Central bank officials have been working to dismantle the powerful consensus they previously built around monetary policy for 2019. Up until just a few weeks ago, the prospect of ongoing bond sales and 3-4 rate hikes over the course of this year was widely considered likely.

Today, that consensus is gone.

When the selloff in the equity markets got serious, President Donald Trump and other administration officials ramped up the criticism of Fed Chair Jerome Powell and the central bank’s policy of tightening.

When the selloff in stocks hit its crescendo in late December, Treasury Secretary Steve Mnuchin made a high-profile call to the CEOs of the six largest banks. The next day, Christmas Eve, he held a conference call with the Plunge Protection Team. The day after Christmas, stocks enjoyed the largest single day point rally in history!

So far this year stocks are off to the best start they have had in more than 30 years. Coincidence? We don’t think so.

These days Fed officials are telegraphing a 180-degree shift in policy. Just last week Kansas City Fed President Esther George implied that she and the other central planners will change course and stop selling from the $4.5 trillion hoard of bonds accumulated during the period of “Quantitative Easing.”

As that supply of Treasuries dries up, prices can be expected to rise and yields to fall. Stock prices rallied on the news.

The 10-year bond yield now sits at around 2.7% – down dramatically since October. The lower rates and intervention of Wall Street bankers and the Plunge Protection Team have worked wonders for the equity markets.

Investors now have to assume the Fed is “playing ball” with the President. Officials there will be working diligently to keep interest rates artificially low and weaken the dollar. This comes as little surprise to many of the critics of our monetary policy.

Our markets are hopelessly addicted to stimulus and almost no one in Washington or on Wall Street is ready to endure the withdrawal symptoms associated with going cold turkey.

The Fed will instead keep blowing bubbles, including the mother of all bubbles – U.S. debt. Investors should prepare accordingly.

By Clint Siegner

MoneyMetals.com

Clint Siegner is a Director at Money Metals Exchange, perhaps the nation's fastest-growing dealer of low-premium precious metals coins, rounds, and bars. Siegner, a graduate of Linfield College in Oregon, puts his experience in business management along with his passion for personal liberty, limited government, and honest money into the development of Money Metals' brand and reach. This includes writing extensively on the bullion markets and their intersection with policy and world affairs.

© 2019 Clint Siegner - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in