Rory Robertson
Rory Robertson
downside market risk yield
Just as the market overshot on the downside in yield in May/June, the risk is that it now overshoots on the upside.
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If gross domestic product prints 2.75 or 3 percent, it's broadly where the market is. People put very little weight on the fact that any pressure on inflation in the U.S. is quite modest and that's breeding low and steady bond yields.
explicit fed markets pause
The markets were a little disappointed that the Fed didn't give any explicit hint that a pause is around the corner.
coming dream economy extended inclined justify low markets period rates strong understand
The markets are coming to understand that policymakers will be inclined to keep rates very low for an extended period -- the FOMC (Fed rate-setting committee) can still only dream that the economy will be strong enough in 2002 to justify a rate hike.
australia interest lesson market rates relatively stay
The lesson from Australia is, as long as interest rates stay relatively low, the market will cool, not crash.
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The Fed is trying to do what it can, but the history of the past 200 years is that big booms tend to end badly -- big equity market booms in particular. The Fed so far has done a magnificent job of holding the show together, but we don't know what effects of the bubble are still in the pipeline.
bit fed feeling investors kicking markets might nervous pushing saying shorts sure worse
I'm not sure how markets might react. On one hand, you could see the shorts kicking in, pushing it higher, but on the other hand, you could see investors feeling a bit nervous because the Fed is saying things are worse than they thought.
falling feed giving helpful lower oil prices quite rising stimulus terms
Rising oil prices are quite unhelpful, and falling prices are quite helpful in terms of giving stimulus to the economy. Lower prices feed through pretty well to everyone immediately.
gradual improvement painfully rate
There is a very gradual improvement, but the rate of improvement is painfully slow.
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If we hadn't had a recession a year ago, and we were watching the fall in employment, a stalling manufacturing sector, falling bond yields and falling stock prices, many people would think we were entering a recession. There's an assumption that the recovery will continue and get stronger next year, when in fact it's possible the economy's tipping over again.
skeptical time
I am skeptical that this time will be different.
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Unemployment at 6 percent means the Fed has just lost six full years of progress towards lower unemployment in just six quarters. With its preferred measure of core inflation at the lowest level since the 1960s, the Fed probably requires a run of monthly payroll gains of 150,000 to 200,000 before it will feel any real need to tighten.
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Financial conditions clearly are quite a bit tighter than they were six weeks ago. I'd be dumbfounded if the Fed was not anxious about this dramatic rebound in yields dampening the rebound in the pipeline.
ball clear core far rise rolling toward
Obviously, a big rise in the core CPI would get the ball rolling toward another hike, but it's far from clear that will be the outcome.