Last week saw US inflation come off a tad but still a long way to go. The US Fed heads (Governor Bowman) are still talking of higher rates. There is also the issue of banking crisis still lingering, in fact getting worse. And the big one this week, the US debt ceiling.
Chicken or egg – for The Fed to fold, the market will have to crash but the market won’t crash because everyone knows The Fed will fold and juice stocks back to un-reality
All eyes will be on the Fed at the FOMC. Odds are high for a 0.25% move again which is in stark contrast to the RBA who will not raise rates. Making the interest rate differential between the two economies at 1.65%.
Bit of a dud week with conflicting signals for the global economy. USA in particular is giving off multiple mixed signals, with data points both showing inflationary and recessionary.
With the FOMC almost two weeks away, soon the Fed members will be in communication lockdown so expect a few more talking heads prior to radio silence.
The US Fed’s favourite inflation number came out Friday night, a tick lower and so it was all aboard the stock market choo-choo train as the market sees no more inflation, no more rate rises and no risk ahead. Right.
At face value, all seems OK in the USA. They are getting bailouts, economic data still strong (PMIs) and stock market finished up on the week. However, pop the hood and the engine underneath tells a different story.
More bank runs as we get to hear from the US Fed this week.
Things are starting to get messy! Two US banks folded this week, one of them being the 2nd largest collapse in US history.
For over a decade I have raged at Quantitative Easing as an evil instrument, a band-aid solution that ultimately just shifted wealth from the middle class to the upper class.