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The Powell Put Revisited....

edited February 2019 in Off-Topic
Perhaps things have fundamentally evolved. If so, perhaps the outlook for interest rates is not as ominous as the one suggested by Gundlach and others. The Fed appears to be beginning to embrace this possibility....

A Fed pivot, born of volatility, missteps, and new economic reality...interviews with more than half a dozen policymakers and others close to the process suggest it....marked a more fundamental shift that could define Chairman Jerome Powell’s tenure as the point where the Fed first fully embraced a world of stubbornly weak inflation, perennially slower growth and permanently lower interest rates.

One question, for example, is whether to make crisis-fighting policies a part of the routine toolkit. Another is whether to try to prepare the public to accept higher inflation from time to time.

The January statement, JP Morgan analyst Michael Feroli wrote recently, showed the Fed “subtly but profoundly evolving” to a new view of the world where a variety of forces have changed the way inflation and interest rates work, and have now changed how the central bank responds.


  • edited February 2019
    Thanks @davfor - Article contains some great analysis of the Fed’s and Powell’s apparent shift in strategy. IMHO that’s what stopped the market slide and precipitated the recent spike in gold and most commodities. Can they keep the rally going? Here’s a “Golden Oldie” from the Bernanke period. Some believe that if the markets falter again we’ll see a return to QE.

  • edited February 2019
    @hank Thanks for the "Golden Oldie" image. It looks like the Fed is implementing at least intermediate-term updates both to its view of the economy and to the extent to which it will attempt to micro-manage it on a routine basis going forward. The January pivot suggests it may be prepared to intervene fairly aggressively -- whatever new "tricks" that may entail if we are still in a low rate world -- when the economy shows significant signs of faltering. Their recent pivot has been welcome to me so far in 2019 given my decision not to reduce my percent allocated to stocks this year. Moving forward, I am concerned that micro-management brings with it risks for novel forms of major missteps. I too wonder how long they can manage to keep all the balls in the air.
  • edited February 2019
    @davfor - Thanks for commenting. Doesn’t seem like that long ago the Fed was shoveling liquidity into the system at a rapid pace. I also stayed put. Didn’t expect the turnaround so soon. Unlike past market rallies, this time the customary inflation hedges (gold, oil, real estate, raw materials) are joining in. It’s about time.
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