Finance Geek(#wallstreet) cum sports fanatic(#I#watch#Manchester United#Patriots#Cricket#ViratKohli#Federer, travel bug...#money never sleeps and neither do I.
It strikes me that markets are pricing in more hawkish central bank reaction functions as compared to where central bankers are. I suspect most central bankers are in wait and see mode and will want to see through some of the energy price increase. Unlike 2021, demand is not surging which makes seeing through a defensible strategy. They will likely be more cautious about rate cuts relative to pre-Iran conflict but markets seem to be pricing in much tighter monetary policy.
Trump told Jerome Powell to cut interest rates.
Powell didn't do it.
Now Trump is trying to force Powell to cut interest rates by crashing asset prices.
We will see who blinks first.
Carnage so far in 2022
Netflix -72.4% = worst year on record
Facebook -43.9% = worst on record
Amazon -36.8% = worst since '08
Tesla -30.5% = worst on record
Microsoft -22.5% = worst since '08
Google -21.6% = worst since '08
Apple -17.5% = worst since '08Carnage so far in 2022
One doesn't suddenly become concerned about the prevalence of bots on Twitter in the last 48 hours.
Musk wants to lower his offer price cuz he can. #freemarket $TWTR
The market is still expecting 50 bps rate hikes in June and July.
It's been a long, long time since we've seen the Fed not respond to a large stock market decline with easy money.
And you have to go back to Volcker to find a Fed that has tightened policy into a bear market.
Between 2009-2021, every single time the markets wobbled + the indices declined by ~20%, the Fed intervened and 'saved the day'.
That really encouraged speculation/risk taking and resulted in misallocation of capital.
Fed's hands are tied today, shareholders are on their own.