Unfortunate timing for my SPY cover. Really bizzare how people went from 'no hike' to 'hike coming' in like 48rs. I dont buy it though
Just watched Tarullo (FOMC voter) on CNBC, he didnt sound like he was ready to hike at all. He talks about where the 'discussion needs to be'. He sounded unsure, when the Fed is unsure, they postpone. So yes, maybe Nov or Dec hike, but Sep? I dont think so. No so quickly after a whiff on important data, they need more data to see how real or not the issues are
The reason I ask is because I'm curious how do Europeans deal with situation they are put n. I believe you are in London which is a bit better compared to the EU. Those in the EU are super screwed, most of the safe bonds have negative yields. The ones that dont are from suspect countries that live in a Soros reflexive prison where if the markets thinks they are fine, they are fine, but if they think they are in trouble, they get in trouble. Due their leverage and sensitivity to interest rates On the stock market side, its dangerous, if Europe goes down the Japanese route (if central bank consistently is behind the curve, doing too little too late) you take all the risk, for little return. European stocks haven't done much since 2014. They not up all that much since 2009, but at least they got paid dividends On real estate, its the same risk. If the Japanese scenario plays out, real estate wont be a good investment, thats for sure. While some countries can do well, I believe as whole, the sector is not doing all that great And in the meantime, the whole EU project can unwind leading to some big losses to investors In Britain things are a little better, so i ask, how do you invest and trade this world that we live in?
One thing I was considering, maybe I should really load up on Oct Fed futures. The only way I can see that the Fed hikes in September, is if they changed their framework and now they will hike regardless of market preparation (without a clear signal coming from the previous Fed statement, like the last time), sorta in a way that shows that they are concerned about asset prices and dont really care about softening the blow. Because the Econ data is not really there (yet, they need more ISMs and employment reports to be sure). So if I load up and lose, that creates that "good" bear market that I was talking about earlier. A decline in stocks and bonds that improves valuations, prevents some sort of bubble and enables investors to reinvest money at better implied returns instead of being stuck a nosebleed valuations for everything. So it would be a 'good' loss
One thing is for sure, they have a lot to talk about in that September meeting. They are between a rock and a hard place. Yellen signed a 'Rate hike probably appropriate in the coming months' but they didnt prepare the market for a September one (by putting something clear in the last statement) or by saying something more direct (if its 'probably appropriate', meaning, its not a done deal, why would a bad ISM services not delay it for the latter part of the coming months?). So they might go to the 2nd option, which is not to hike but signal it more strongly for the next meeting. But the next meeting is right before the election and it does not have a press conference nor Economic Projections. So it would be a strong blow to markets (and they care about softening the blow, at least they have historically). They might want to leave it to December. But how to admit that without admiting that you care about the election and the press conference? You just talk hawkish about all kinds of stuff, like they are doing, at least thats my read
So, if stocks put some kind of nice pop, I will try to reestablish my short hedge (I hate to chase down a short, it blows in my face so many times). Both because of the September/October seasonality but also because the Fed is likely to be active on the Open Mouth operations. I think there is some potential for a significant pullback in stocks, we could be in a Tepper like moment where either -The economy continues to churn along and the Fed hikes rates because of that. Then stocks decline -Or the economy weakens and the Fed doesnt hike. But the econ concerns take over and we tank like in the beginning of 2016 Of course, people could just ignore everything and pop everything to new high (heck, didnt they almost do that after the weak ISM?), thats why you got to bail when the price action turns on you