Displaying items by tag: fed

Wednesday, 19 January 2022 19:35

Jamie Dimon Gets Ultra Bearish

Goldman and many other Forecasters have upped their projections for the number of rate hikes in 2022, but most are calling for a timid four in order for the fed to better combat inflation. CEO of JPMorgan Dimon, however, sees a much more aggressive Fed. Dimon says the Fed will hike rates six or seven times in 2022, which would bring the baseline FFR up to a whopping 2%. Dimon says 200 basis points used to be an overnight adventure for the Fed during the Volcker administration. Despite these wildly hawkish projections Dimon still sees the fed threading the needle and maintaining a balanced growth path while fighting inflation. Others called Dimon’s projections irresponsible and said the market would suffer greatly for hikes that severe.

FINSUM: There is no way the Fed could hike rates 2% in 2022 and maintain a balanced growth path, however, the Powell Fed bringing inflation back down and not taking the economy is still the most likely outcome, just not under seven rate hikes.

Published in Eq: Total Market

hroughout 2021 one of the biggest worries for investors, business owners, and policy makers has been the return of inflation. Long dormant, inflation has surged as markets and economies recover from the COVID-19 pandemic ... [Read More]

Published in Bonds: Total Market
Tuesday, 11 January 2022 21:31

Goldman Makes a Very Bearish Call on 2022

Goldman Sachs updated its path for Fed tightening in 2022 calling for four rate hikes instead of three in 2022. This is a fairly aggressive path for tightening as the current Fed target interest rate is between 0%-.25% which means it will hit around 1-1.25 by Goldman’s forecast. The biggest reason for the rate rises is the tightening labor market. Previously the Fed leaned on slack in the labor market as an excuse to brush off inflation concerns but now they are no longer doing that. Goldman has the hikes penciled in for each quarter March, June, September, and now December. Goldman saw regional San Francisco President Mary Daly’s comments of shedding some balance sheet weight of indicating the Fed’s future path.

Finsum: The Fed hasn’t tightened this quickly in the post-financial crisis era, but broadly the markets and yields are in lock step with Goldman’s predictions.

Published in Eq: Total Market
Wednesday, 22 December 2021 19:02

Hedge Funds Reliant on Rate Hikes

Hedge funds opened the floodgates and entered a firesale on treasuries in response to Powells pivot on inflation. JPMorgan said the selling demonstrates leveraged investors pivoting out of Treasuries. Hedge funds are continually shorting across the futures market, and are now hitting an annual low in U.S. 10-year treasuries futures. The only problem is the tapering hasn’t begun just yet and rate hikes are only in theory. This means hedge funds drastically need the Fed to follow through on a hawkish swing if they don’t want to get hung out to dry.

FINSUM: It would be extremely unlikely the Fed pivots on its tapering. The only way that's possible is if inflation was significantly below target the next one or two quarters.

Published in Alternatives

Jerome Powell and the Fed turned a 180 this week with the future of its asset tapering and interest rate hikes. The Fed sees Covid and omicron as yesterday's demons and have set their sights on inflation. With that the Fed is gearing up for potentially three rate hikes in 2022 and is moving away from the transitory inflation story. This could be bad for bond investors as the Fed’s tune could change if omicron picks up or inflation shifts gears, meaning there is a lot of uncertainty about future rates. Nonetheless, higher rates could undercut existing long term bonds so those still invested in bonds should consider switching their investments to shorter duration Fixed Income ETFs or less sensitive corporate bonds. Lower duration bond ETFs will be more stable when there is interest rate uncertainty (unlike in standard times).

FINSUM: The Fed could just as quickly hop off the inflation fighting hawk train if they get a series of lower PCE reports, which means investors need to be ready for various scenarios.

Published in Bonds: Treasuries
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