2017/09/20 Commentary: Fear of Fed
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Commentary: Wednesday, September 20, 2017
Fear of Fed
Yep, ‘Fed dread’ is back. And we are not talking about Janet Yellen deciding to go for a fashion change and switch her hairstyle to dreadlocks. Various market tendencies outside of a continual storm reconstruction driven bid in US equities (see Thursday, August 31st Commentary: When It Rains… and last Thursday’s Commentary: Storm Surge! posts for much more on that) reflect some concerns about the potential for the FOMC to tighten in a way that will weigh on the govvies and also affect foreign exchange. The latter has seen a modest recovery in the US Dollar Index from the violation of it major 2.5 year trading low at 91.91 on the Close two weeks ago. And concern about the FOMC’s next moves is likely behind those two market tendencies.
Yet as explored in our Thursday, July 27th Commentary: Balance Sheet Chicanery post, the latitude is narrow for the Fed to move in any meaningful way on its two primary fronts: further base rate increases (almost nonexistent at present), and balance sheet reduction that is the primary bogey man worrying the markets right now. While the latter is the more likely to possibly be definitively outlined and then discussed at today’s press conference, on all recent assessments by Fed governors and outside analysts it will be so incremental as to be more psychological than quantitatively critical.
This is also the same as noted in our Commentary: Balance Sheet Chicanery post, and we will be revisiting the reasons behind no likelihood of a rate hike and why the balance sheet reduction is psychological. Yet, let’s give due respect to that psychological component, as the govvies are prone to reacting to future influences as well as current conditions. Consider the major drubbing the US T-notes experienced after both Fed Chair Bernanke’s QE ‘taper’ comments in May 2013, and the hit they took after the last US election even though they managed to rally back in each case (much more below.)
However, prior to delving into all of that, this morning saw the release and presentation of the OECD’s latest Interim Economic Outlook. It seems to confirm that a general global growth cycle is indeed in progress in the short term. Yet it also points out the ways in which the medium term is less assured. The lack of global investment, rising trade barriers, a lack of higher wages typically accompanying a sustained recovery (also important for the Fed), need for further systemic reforms and other key factors might still restrain the recovery. That remains a key focus for the Fed as well.
Authorized Silver and Sterling Subscribers click ‘Read more…’ (below) to access the balance of the opening discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review your options. Authorized Gold and Platinum Subscribers click ‘Read more…’ (below) to also access the Extended Trend Assessment as well.
2017/09/14 Commentary: Storm Surge!
2017/09/14 Commentary: Storm Surge!
© 2017 ROHR International, Inc. All International rights reserved.
Extended Trend Assessments reserved for Gold and Platinum Subscribers
Commentary: Thursday, September 14, 2017
Storm Surge!
That brought an actual storm surge onto the eastern side of the state, most notably to heavily populated Jacksonville as the St. John’s River overflowed its banks. In fact, there is still significant standing water in central Jacksonville that the authorities warn will take up to another week or more to subside. The problem there is much as we had noted for southeast Texas: it is the watershed into which waters from inland in the Carolinas will continue to drain via the river, in addition to being affected by daily tidal shifts. The last Jacksonville flooding of this magnitude was in 1846.
Yet that destructive surge is not the one we are referring to in the title of this post. That is the ‘surge’ in US government spending that will naturally occur (as surely as the weather) to assist with rebuilding of the hurricane and storm damaged areas. Irma was a record hurricane on quite a few measures, even if the greater reconstruction spending will likely be in response to Harvey’s southeast Texas flooding. The latter will likely set records beyond the Hurricane Katrina expense, and their combined cost will surely be a major new reconstruction record in the hundreds of billions of dollars.
More below, yet only after the degree to which, along with ‘other factors’, that is driving trends in each asset class. That of course includes the equities looking forward to the major US cleanup and reconstruction building boom, the govvies becoming a bit negative after the recent rally, and the US dollar possibly remaining weak overall.
Authorized Subscribers click ‘Read more…’ (below) to access balance of the discussion. Non-subscribers click the top menu Subscription Echelons & Fees tab to review options. As this is a ‘macro’ assessment, Market Observations remain the same as last weekend’s WEEKEND: Truculent Trump Tribulations post that were updated (lower section) Tuesday morning, and there is no Extended Trend Assessment in this post.
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