This might be the most fascinating market backdrop of my career.
Financial conditions are much too loose. They remain too loose at home; they remain too loose abroad.
2017 was phenomenal in so many ways. The year will be remembered for a tumultuous first year of the Trump Presidency, the passage of major tax legislation and seemingly endless stock market records. It was a year of synchronized global growth and stock bull markets, along with record low market volatility. It was the year of parabolic moves in bitcoin and cryptocurrencies. “Blockchain the Future of Money.”
Yet none of the above is worthy of Story of the Year. For that, I turn to this era’s Masters of the Universe: global central bankers. div>
Ten-year Treasury yields jumped 13 bps this week to 2.48%, the high going back to March. German bund yields rose 12 bps to 0.42%. U.S. equities have been reveling in tax reform exuberance. Bonds not so much.
Janet Yellen’s Wednesday news conference was her final as Fed chair. Dr. Yellen has a long and distinguished career as an economist and public servant. Her four-year term at the helm of the Federal Reserve is almost universally acclaimed. History, however, will surely treat her less kindly.
In nominal dollars, Total U.S. System (Non-Financial, Financial and Foreign) borrowings expanded $1.007 TN during the third quarter to a record $68.012 TN.
Financial conditions have obviously remained much too loose for far too long. This predicament was conspicuous in the markets this week.