It was inevitable.
And yet the market is struggling to digest it, and the mainstream financial media is grasping for stories to explain it.
“Normalization” is a smooth-sounding word. But it happens with moves like last week’s spike in Treasury yields.
It’s happening; rates are going higher. And don’t expect Federal Reserve policy to change until something breaks.
Fed Chair Jerome Powell made that clear in two public speeches last week. He doubled down on the confidence he expressed following the September Federal Open Market Committee meeting.
He reiterated his view that the economy is “currently enjoying a remarkably positive set of economic circumstances.” He also noted that even though the current cycle probably won’t last forever, it can continue for “quite some time, effectively indefinitely.”
The current cycle can continue indefinitely…
Well, I’m skeptical. And I expect “normalization” to create many overreactions along the way. And I – along with my Treasury Profits Accelerator readers – plant to profit from them.
According to Powell, Fed interest rate policy is still “accommodative,” and the central bank will continue to hike rates gradually until we reach the “neutral” rate.
I can promise you this: The economy won’t grow and markets won’t go up forever. Something always gives.
We’ll see if we get back to “neutral” before that “something” eventually hits the fan.
Take These Jobs…
The mainstream financial media will struggle to explain what we’ve understood to be the inevitable.
Humans generally love a “story,” to offset their eternal struggle with randomness.
For instance, and it was easy to cite Automated Data Processing’s (ADP) employment summary as fuel for last week’s initial move.