For the last few decades we have been in a low interest rate environment where deficit spending would not cause major issues. However, a 40-year high in inflation prompted the Fed to tighten monetary policy at a fast pace. Higher rates mean the cost of servicing U.S. debt will follow higher.
Pandemic-related stimulus measures created higher debt to GDP ratios around the world.
The fed funds market expects a 25 basis point hike at the May 3 FOMC meeting. After that, policy could get a bit more interesting.
The dollar is not invincible, but it will remain the dominant reserve currency until a better alternative presents itself.
A long-term look at wheat prices
Some interesting charts from our recent post.
10-year Japanese government bond yields continue to trade near their 0.50% yield curve control ceiling. Despite a 30-year high in inflation and rising wages, the Bank of Japan remains in a decades-long fight against deflation. With the BoJ's new leadership under Kazuo Ueda, a shift in policy is possible.
A look at the size of various markets compared to the U.S. economy
Today's topics include raising the debt ceiling, are we out of the woods?, stocks versus cash, sticky inflation, First Republic teetering, the battle inside the Fed over wage gains, small caps face pessimism, job switchers vs. job stayers, a new era in PE, shadow banks, and Summers on the Fed's 2% inflation goal
Today's topics include CDS spreads continue to widen, do earnings surprises matter?, First Republic, Druckenmiller bets against the dollar, quant funds, the history of options trading, and car dealerships' role in higher inflation