The Fed has begun the process of “normalizing” its balance sheet but the effects have yet to show up in actual reductions. That will start in December. You’d better watch out! Here’s why.
current data continues to reflect patchy growth. The top line numbers are strong, but there’s evidence of weakness in some areas. It appears that top income earners are paying a lot more taxes and skewing the totals. But they’re the investors, so these increases in income to some extent generate demand for stocks. At the…
Strong federal tax collections for October and through early November will encourage the Fed to keep tightening. That’s bearish. Markets top out when the news is good because that’s when central banks pull the punchbowls. This is a classic repeating theme throughout the history of modern central banking.
European banking data continues on a slow growth or no growth path. The weak sister countries show no sign of turning around. At the end of October the ECB announced that it would cut QE to €30 billion a month in January 2018. That’s a 50% cut. The media is treating it as it’s no…
While Treasury supply is in the process of turning up after years of decline, Treasury demand continues to decline. That’s a recipe for lower prices and higher yields.
Treasury supply was light from mid September to mid October. But the party is over now if the Treasury follows the TBAC.
Withholding tax collections have continued to surge right up to this week, but other taxes are weakening. The pattern suggests that the highest earners are seeing outsized gains that skew the top line numbers while the bulk of the population stagnates. Here’s what that means for the market outlook.
Macroliquidity is still growing. The pace of growth accelerated a bit in the third quarter, but that’s about to change as the Fed starts draining funds from the banking system in October.
The Fed has done the deed. It will begin the process of “normalizing” its balance sheet in October, just as their proxies had clearly told us it would. “Normalizing is the Fed’s euphemism for tightening, draining, pulling the punchbowl, siphoning money out of the system, crushing the speculative longs, and ultimately killing the bull market.…
While Treasury supply is in the process of turning up after years of decline, Treasury demand continues to decline. Here’s what this means for your money.