I have a theory that Fed governors “create” volatility for fun. Clarida wakes up thinking “hmm market has been going up for some time…would be a shame if rate rhetorical shifted hawkish…”
In the last tightening cycle, the Fed implied there was a lot of room to go higher with FFR at 2%+. That caused a recession in manufacturing (and a correction in most stocks ex-FANG).
They won't do it anymore since they are no longer allowed to actively trade stocks. Maybe they will crash the markets as revenge.
Now, what can cause recession if US factories can't even high enough workers? This is not that economy is over-heating. Fed can't crank enough socks from US factories and can't pump enough crude oil or gasoline to lower energy prices.
Well, considering the US imports 80% of everything we use...it is out of our hands...and that IS the crux of the whole problem. When you import everything and demand soars, you are at the mercy of the suppliers. Its a very fcked up place to be. Not many other countries in the world are quite so dependent on imports and have so very few actual manufacturing workers in place. And now, even our service workers are demanding higher and higher wages and stepping out of the job market until they get something they like. US production supply and services charts look just like ARKK. US demand and wages charts look just like SARK. If John Maynard Keynes saw the predicament the US was in right now, he would bug out completely.
I think so. That's when Powell said he would raise rates on "autopilot" and then the QQQ dropped 20% from 12/3/18 to 12/24/18. The industrials already rolled over in October.
The expectation the market has of fed action is useless. What is useful is the reaction the market has to fed action.