In today’s Fat Tail Daily, The Fed’s Powell reminded markets inflation still needs taming after last week’s S&P rescue. Watch today’s Closing Bell to find out why bond yields need to fall further before becoming bullish, as well as the latest on gold, oil and the S&P 500.
After rescuing the S&P 500 from the cliff’s edge last week, US Fed Chairman Powell reminded investors that inflation is still a beast that needs taming.
US stocks fell and bond yields rose on Thursday night. An auction of 30-year bonds in the US failed, forcing dealers to take double their usual amount.
This hints that rising yields relate to inflation but also market indigestion as the government issues more bonds in a market with fewer buyers.
Now that the Fed is a seller, US households have become the major buyer. Offshore demand has waned.
How high must yields rise to handle unknown inflation levels and a debt-loving government?
I think it is too early to call an end to the rate rise cycle. As I show you in today’s Closing Bell video, falling bond yields need further drops before becoming bullish.
Equities are in a weekly downtrend, so it won’t take much selling to get the ball rolling to the downside again.
If stocks fall below the recent low, I’m calling a quick 10-15% fall as a possibility.
Santa needs to come early this year to save the situation. So I’ll grab my popcorn and see what comes next.
In today’s Closing Bell video I look at oil, gold, bonds and the S&P 500.
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To all the members who I chatted with last night and especially the ones who bought me beers in the pub afterwards, I had a blast chatting with you.
I thought it was a terrific night and we’ll be sure to do it again because I learnt so much.
Editor, Fat Tail Daily