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The Fed believes controlling inflation expectations is critical to returning to its 2% target. However, most measures of inflation expectations are becoming unanchored. If the Fed continues ignoring this, the bond market's reaction will worsen.
Differentiating 'allocator' ETF flows from 'trader' ETF flows
The TIPS market and consumer surveys expect higher inflation levels in 2025. The bond market is responding with higher yields even though the Fed is cutting rates and sees more rate cuts into 2025.
Weather and strikes have muddied the payroll report's economic signaling. We will have to wait for revisions. The unemployment rate was not muddied, pointing to some strength in the labor market.
The Index of Leading Economic Indicators' failure to predict the post-Covid economy should be a reminder that this is no longer the pre-Covid economy. Assuming the economy "normalizes" to the pre-Covid economy risks policy mistakes.
Money parked in the Federal Reserve's reverse repo facility is shrinking again as money fund managers extend maturity to hold onto 5%+ yield as long as possible. This move is being driven by the belief that the Fed is finally going to start cutting...
The stock market's year-to-date gains are more concentrated than just about any historical period. Wall Street is desperately looking for money to keep the rally going, but sources of liquidity are drying up.
We keep returning to the issue of depositors withdrawing funds from banks for higher-yielding alternatives. This is a liquidity crisis impacting the liability of side of the banks' balance sheets. Banking data released late last week show the...
In this confusing environment, we believe the Fed will take its cue from the stock market in deciding what to do next week.
Payrolls beat expectations for a record 11th straight month. Despite another beat, the fed funds market remains split on whether the Fed will hike 25 basis points or 50 basis points on March 22.
While intraday volatility rises, longer-term volatility remains subdued. Traditional measures of volatility are being questioned. Understanding how this happened might give a clue as to where the risk lies.
Many government statistics are collected via surveys. As with political polls, the public is souring on answering them. The result is lower response rates and larger error rates.