The Market 2022-2023-2024

Finito

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For those that don't understand how monetary policy works; here is an overly simplistic explanation.

The Fed has been buying billions of dollars in corporate bonds, treasuries, and mortgage backed securities every month since the start of the pandemic creating massive artificial demand for those assets and suppressed interest rates which has pumped trillions of dollars into the markets and economy that otherwise would not have been there. Most agree that it was necessary initially, but there is debate over how much and how long was appropriate. This is called quantitative easing.

The Fed is now tapering/reducing those purchases which means they are buying less assets every month with the intent to stop purchases all together by March or the end of Q1.

Now they plan to sell a good portion of the bonds that they have purchased that are sitting on their balance sheet. When the Fed sells assets they get cash in return which removes it from the markets and economy. This is called quantitative tightening.

No more fed pumping money every month, higher interest rates, and the removal of money from the economy is a huge change and cause for depressed market/economic outlook.

So basically, everyone is hoping the Fed can thread the needle and stave off significant inflation without causing a massive recession and stock market crash all while minding unemployment numbers and continuing to finance massive US budget deficits.

Sounds like a house of cards to me
 
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Sounds like a house of cards to me

Who knows. It could carry on for years, but at some point there has to be a reality check. I'm not letting it influence my long term investing though. My retirement accounts are still 100% equity, but I have moved a little out of growth and into value.
 

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reality check
A potentially hard and painful one.. all that QE will have repercussions that will ripple through the global markets regardless of their pace of balance sheet reduction. IMO.
 

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I know I've had other doom and gloom predictions.....but here I am once again! :) My charts are getting extremely sketchy again.... just a heads for awareness of high volatility and the moves that can occur. Good luck.
 
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10 year treasury yields are up 15 basis points since the start of the year. 3 to 4 rate hikes are projected for 2020. If you recall, the market threw a fit in Q4 when the 10 year hit 3% and the NASDAQ had a big sell off. Trump also whined and the Fed ultimately capitulated to him and the market.

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dscher

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10 year treasury yields are up 15 basis points since the start of the year. 3 to 4 rate hikes are projected for 2020. If you recall, the market threw a fit in Q4 when the 10 year hit 3% and the NASDAQ had a big sell off. Trump also whined and the Fed ultimately capitulated to him and the market.

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We're in a weird spot with yields and the curve right now. The fed can control the short end but not the long end. If the economic conditions that we've seen persist, the bond market will scream lower rates because the weakness in the overall consumer IMO. Then any increase by the fed will cause another potential inversion of the curve which will spook investors once again. Damn if they do or don't. We all know they walk that tight rope of not upsetting the markets. I just think they are getting shoved into a corner with no way out. Time will tell.
 
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We're in a weird spot with yields and the curve right now. The fed can control the short end but not the long end. If the economic conditions that we've seen persist, the bond market will scream lower rates because the weakness in the overall consumer IMO. Then any increase by the fed will cause another potential inversion of the curve which will spook investors once again. Damn if they do or don't. We all know they walk that tight rope of not upsetting the markets. I just think they are getting shoved into a corner with no way out. Time will tell.

I really think the fed is intent on stopping QE and getting to at least 1% for the fed funds rate so they have a tiny bit of ammo for a slow economy/recession in the next couple years.

Imagine hitting an economic downturn with rates at zero and the fed already pumping the economy with $120B every month? Negative rates?
 

dscher

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I really think the fed is intent on stopping QE and getting to at least 1% for the fed funds rate so they have a tiny bit of ammo for a slow economy/recession in the next couple years.

Imagine hitting an economic downturn with rates at zero and the fed already pumping the economy with $120B every month? Negative rates?
One word. Japanification.
 
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Pretty sizeable sell-off today led by the NASDAQ.
 
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10 year jumped a whopping 10 basis points from Friday. 1.78 to 1.875.
 

dscher

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10 year jumped a whopping 10 basis points from Friday. 1.78 to 1.875.
Yep. I'm holding pure TLT in my retirement account. I still think yields are heading much lower... eventually. But the ride is going to be 'hold onto your seat' crazy. IMO.
 
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Yep. I'm holding pure TLT in my retirement account. I still think yields are heading much lower... eventually. But the ride is going to be 'hold onto your seat' crazy. IMO.
I'm holding a very small position in TTT. Up 4.5% today.
 
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This is not meant to be political or directed at a particular party as both are responsible; it's more of a commentary on how some of the media narratives have changed surrounding inflation. Obviously the headlines were cherry-picked to portray the narrative in the worst light, but I thought it was funny regardless.

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dscher

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This is not meant to be political or directed at a particular party as both are responsible; it's more of a commentary on how some of the media narratives have changed surrounding inflation. Obviously the headlines were cherry-picked to portray the narrative in the worst light, but I thought it was funny regardless.

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I have zero idea how if we are in this massive inflationary period like the media would have us to believe, why the relative strength of the dollar to things like tips and gold are outperforming right now...by a wide margin.

Good ole MSM. Telling ya about something when it has already come and gone...we all just need to remember to buy every dip when they scream economic depression. Lol. Warren Buffett would be proud.
 
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I have zero idea how if we are in this massive inflationary period like the media would have us to believe, why the relative strength of the dollar to things like tips and gold are outperforming right now...by a wide margin.

Good ole MSM. Telling ya about something when it has already come and gone...we all just need to remember to buy every dip when they scream economic depression. Lol. Warren Buffett would be proud.

Gold and silver are finally starting to make a move upward.
 

dscher

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Gold and silver are finally starting to make a move upward.
I can see gold holding up better than silver even if stagnation or deflation become our reality at some point. Silver is tied into industrial usage that will make it economically sensitive.
 
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I can see gold holding up better than silver even if stagnation or deflation become our reality at some point. Silver is tied into industrial usage that will make it economically sensitive.
Silver usually pops after gold once the speculators move in to precious metals.
 

dscher

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Silver usually pops after gold once the speculators move in to precious metals.
Yeah. They have an interesting correlation at times. I'm no macro guy, but we'll see if gold is really holds as that hyperinflationary hedge during our next downturn. I believe it will...but new times are emerging in this world. Who knows.
 
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