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In a narrow technical sense, the FOMC was indeed hawkish
But in the cessation of QT and through questions, it more broadly reconfirmed a reaction function at once deeply asymmetric and completely oblivious to asset price inflation
This paves the way for a further melt-up in risk assets and havens – and for more assets to exhibit the sort of exponential sawtooth boom-bust recently seen in gold
Full replay of 22 Oct webinar
The fuel for the rally comes from a mix of fiscal stimulus being channelled into fund flows and financial sector leveraging
But cracks are beginning to appear, from First Brands, to doubts about circular financing in tech, to the flight into gold
To understand the limits of leveraging, look at the fund flows
First third free to view; full version only for clients with Group Webinar and One-on-one subscriptions
Free clip from 22 Oct webinar
The fuel for the rally comes from a mix of fiscal stimulus being channelled into fund flows and financial sector leveraging
But cracks are beginning to appear, from First Brands, to doubts about circular financing in tech, to the flight into gold
To understand the limits of leveraging, look at the fund flows
First ten minutes free to view; full webinar only for clients with Group Webinar and One-on-one subscriptions
The fuel for the rally comes neither from rates, nor from fundamentals, nor from central bank liquidity
It stems from a mix of fiscal stimulus being channelled into fund flows and financial sector leveraging
The resultant mix of too much money chasing too few assets both suppresses risk premia and postpones credit events – to a point
But it remains critically dependent on the continued credibility of the borrowers and the system
The recent “bond rout” would be better described as a long-end bond technical
It reflects dwindling pension demand more than existential fears around inflation or debt sustainability
Governments should reduce their long-end issuance accordingly
Investors should continue to hold steepeners until they do – without necessarily being short duration
The more Trump exerts personal control over US organs of state, the more the US’ real power is eroded
The main mystery is why this is still not being priced into markets
Part of the answer revolves around the amorality of capitalism, and prospects for more easy money
But much is attributable to the extreme and abrupt nature of credit repricings
