Why? Because Missouri is the “Show Me” state of course! Interest rates on the 10-year U.S. Treasury bond have barely budged, even in the face of inflation measures we haven’t seen since the 1980’s. Very strange it is that the bond market is signaling to market prognosticators that inflation pressures are not going to last? Worst inflation pressure in decades and it may indeed be “transitory”? How do bonds know what most of us do not? That’s the $64,000 question. I mean bonds are only long term loan instruments, but with quite a brain I might add. I actually don’t know myself why the bond market tends to be a more accurate leading indicator than the stock market ever was. I’m not certain as to why that is always the case, but it is!
Let’s postulate for a moment. Is the bond market anticpating an “Obama-esque” economy in the near future? Joe Biden was Vice President when then President, Barack Obama, resided over the United States in the Executive Office, overseeing the largest economy in the world. Obama engineered a dismal record of growth over two consecutive Presidential terms – totaling 8 years in office. In only one of those years did U.S. GDP growth ever exceed a 2% handle. The year was 2010. I’m beginning to believe that the bond market may be preparing us for another re-make of the Obama decade – a sub-par, over-taxed, over-regulated mess all wrapped inside what would be an otherwise “robust” economy, an economy attempting to escape the clutches of deadly Democrat Party proposals. Turns out, the U.S. economy from 2009 thru 2016 was definitely the little engine that couldn’t. Growth trajectories so low that the Fed had to invent a thing known as “Quantitative Easing” just to revive the patient from deflationary pressures, which had taken hold here in the United States. If you remember back then the Fed speak was all around how they were challenged to guide monetary policy toward re-achieving at least a 2% inflation rate, which had all but disappeared for several years. Deflation is about as bad a scenario as runaway inflation – both are harmful to the prosperity of Americans.
It is pitiful to watch the economic destruction witnessed once Socialist agendas are allowed to rule. “Free Market” forces are the only way for an economy to run at maximum efficiency and find equilibrium on both the supply and demand side. Hence, supply shocks would be a rarity when free-market forces are allowed to operate unencumbered from over-regulation and taxation… unfortunately, “some people” obviously skipped Economics 101. 😉
Let’s go Fed! Basically what J Powell told the stock market was hey, we’re still buyers for another three months. This was clearly telegraphed by Powell last month. There was however something that I haven’t seen in years.
Powell took charge and manned the helm of the ship. Powell actually pointed blame at himself and used the word persistent vs transitory. Real rates of return complete the picture, currently we can measure that as 1.50% (yield) – 7.00% (inflation) = -5.50% on the ten year creating a drop in the dollar (more dollars needed for goods and services), I’ve heard that’s inflationary. Bonds look like no growth or low growth although we’re not yet inverted on the yield curve. Potential for high inflation persistence causing the Fed to slam the brakes is high in my opinion, causing contraction. These tea leaves are a difficult read right now, especially considering the Fed needs to clean up it’s balance sheet. The BoE just came off 0% and raised .25%. No, I won’t go into LIBOR yet.
Uh yep, yep, yeppers!
The 10-year Treasury has had a negative (effective) yield for a very long time. Even when inflation was hanging around 2%, and the 10-year was yielding less than 2%. Market pundits have known that for awhile but the Fed had to keep on with QE version “infinity” just to keep the economy on a growth trajectory. Now to me it looks like the Fed is in a pickle, they can no longer accommodate markets with fluffy stuff. They should withdraw immediately in my opinion, with the U.S. at full employment + 11 million job openings I see no big threat in the near term to stopping bond purchases right away!
Agreed, stop buying already. Guess what? The dollar weakened today and the pound moved higher on the BoE raise. That shock gave ol’ Boris Johnson a shave and a GI hair cut. Serious question, does America read anymore, care about basic economics or free and open markets? Are we that dumb after our education in CRT, Bobby has two dads and long division? My fear of ignorance is real. Did Pelosi just realize that she’s a bit behind the curve on crime? Now she and London Breed want to get tough on crime? They’re lying, maybe they see an election coming up. Ok, I feel better now.
Pelosi today: “I don’t know why many Americans are lawless now.” You talk about brainless and out of touch! She doesn’t know her party is for letting out criminals locked up in prisons? She doesn’t know about her party defunding the Police in Major Cities? She doesn’t know about her party allowing looting all across America? She doesn’t know why crime has catapulted in America under her leadership?