There’s one theme that’s characterized this “market” for the past six weeks since Brexit: push a little here, pull a little there — always just enough to keep it on an upward trajectory.
Yesterday, it was a USD breakout [see: Manufacturing a Breakout] that kept prices high enough into the end of the month. Nicely done, Fed jawboners. But, what’s next, now that the dollar is up against strong resistance?
Did it surprise anyone that the Fed jawboner du jour (Evans, non-voter) walked back all that hawkish bravado, promising low rates forever? Like Fischer yesterday, he made it clear that the only data upon which the Fed is dependent are stock indices.
“If necessary, we could normalize policy much faster than currently envisioned and still keep the pace gradual enough to avoid a disorderly change in financial conditions.”
For those who missed it, Stanley Fischer’s comments on Bloomberg yesterday:
“Well, clearly there are different responses to negative rates. If you’re a saver, they’re very difficult to deal with and to accept, although typically they go along with quite decent equity prices. But, we consider all that and we have to make trade-offs in economics all the time and the idea is the lower the interest rate, the better it is for investors.”
There you have it savers, insurance companies, pension plans, banks, and pensioners. Sorry you can’t earn anything on bonds — the bedrock of your portfolio. At least you’re not paying interest like Japanese and European investors — not yet, anyway. Take comfort in the fact that stock investors are reaping the rewards of your sacrifice — a fair trade-off, no?
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