Over the last week or so a number clients requested both clarification and elaboration on my most recent note, “Fiscal Stimulus: Another Force for Disinflation.”. Generally speaking, folks wanted more precision on the impact of corporate tax reform on wage rates,...
Earlier this month the Fed began to cap the quantity of maturing proceeds they regularly reinvest back into the Treasury and agency MBS markets. This marked a crucial turning point for the Fed balance sheet, as it kicked off the first meaningful contraction of the...
The Powell trial ballon went out last week and risk markets applauded. This week Taylor got a nudge into the center ring, and traders are all choking on their breakfast sandwiches. Most market folks, myself included, have leaned toward the idea that the Trump Fed...
I will keep this note very brief post the CPI. This year has been characterized by consistently strong employment data and weak inflation data. And today's soft inflation number combined with last week's strong employment print adds further credence to the idea that...
Since the election Janet has tightened monetary policy at the December, March, June, and September FOMC meetings. In her latest move this past Wednesday, she kicked off balance sheet normalization and signaled strongly that next December would be a "live” meeting. Now...
Every August I try to check out from both client activity and market commentary. Of course, if trading conditions warrant (as they did in 2011 and 2015), then I write. But if nothing of substance occurs, I prefer to use this time to rest up for what is always a very...
The US CPI has missed market expectations on the downside for the last four months, crashing to a growth rate of 1.6% YoY most recently, from 2.7% YoY back in February. At the same time, core CPI growth has dropped back to 1.7% YoY, and core PCE price index growth has...
A few weeks ago, in a commentary entitled “The terminal funds rate,” I began to flirt with returning towards a positive view on risk parity trades. Looking back, it has been about a year since I recommended the spoo side of that trade – and about 18 months since I had...
On Wednesday we will almost surely get the fourth rate hike of this cycle. And just as a reminder to all the folks who used to think the Fed could never raise rates again without sending us into a 1937-style second Great Depression – uh... that was a really dumb...
I am going to make a bold claim today: US inflation is shockingly high. Now of course, with core PCE at 1.5% and core CPI at 1.9%, your first reaction might be "That Zervos dude is out of his mind – again!" But bear with me; I think I can convince you that this claim...
I am going to make a bold claim today: US inflation is shockingly high. Now of course, with core PCE at 1.5% and core CPI at 1.9%, your first reaction might be "That Zervos dude is out of his mind – again!" But bear with me; I think I can convince you that this claim […]
