Thursday 20 April 2017

The Fed will keep burning the bears

US equity indexes closed mixed, sp -4pts at 2338. The two leaders - Trans/R2K, settled higher by 0.5% and 0.4% respectively. VIX settled +3.5% at 13.94. Near term outlook offers chop into opex/weekend. A big push to new historic highs in the sp'2400s looks out of range until early May.




There is little to note, on what was just another day of moderate swings. Price action is set to remain choppy into this Friday's opex. Clearly, the French election (April 23rd AND May 7th) will be a cloud over US equities, as the mainstream are a little concerned that someone 'not conventional' might be elected.

Volatility itself remains naturally subdued, seeing the mid 13s in the morning, but leaning upward into the afternoon, as equities cooled.

One of the more kooky videos of the day...

... and that was somewhat in sync with what Fed official Rosengren was speaking about today.

The Fed will burn ALL deflationary bears

Rosengren covered a fair few things today. First, there was the issue that the fed balance sheet is due to start being reduced within a few months. However, that will surely go no lower than around 3.5 trn when the next recession hits. Then there was the issue that 'asset buying' was to be seen as the 'new norm' whenever a recession hits.

Lets be clear... the Fed will be more than willing to print TENS of trillions in the 2020s to keep the game going. The deflationary collapse scenario will simply NOT be allowed to happen.

Further, it was made clear that with a recession, rates will again be reduced to near zero. The implications for long term savers are of course dire, but hey, when did the fed/societal elite ever care about that?

*For some extra charts in AH, see:

Goodnight from London