Historically July, August and September are the worst months for stocks, Oct is in 4th place.
Two dumb plays which could make things worse.
Yellen has been encouraging the US dollar higher to $110 DXY to fight inflation (oil) and is also trying to hurt Russia. The last time Yellen did this with some success was in 2014/15 while the US debt levels where under 100% of GDP and the strong dollar did not hurt stocks, bonds or tax receipts. Now this is not the case, a strong dollar is hurting US and debt to GDP is over 120%. If would be very dumb to continue the strong dollar policy. The latest news is that Yellen is overseas organising currency swaps for US dollars.
The FED is intending to decrease their balance sheet by $95BN a month (starting Sept 2022). The Move index measures the risk in the US treasury market and the current risk is now higher than the COVID March 2020 crash. The FED's number one job is to ensure the US Treasury market is operational, and the Move index says it will be very dumb to add more supply to the debt markets. The FED hiking interest rates is a show for the uniformed, the US 1 yr and 2 yr are already over 3% so who cares about the FED Fund rate. Watch for FED comments on their balance sheet reduction plans or reversal of them in the next few weeks.
The next 3 months could be the lows in the risk on markets. Well maybe, ha!
Yes we know: could be, would be, should be.
But the FED and treasury can do some very dumb stuff!
This blog likes Larry MacDonald of the BearTrapsReport comments here.
Chart 1 - Here are two examples when the central planning druids did dumb things. Both resulted in market crashes which latter required more QE and debt to climb out of.
Chart 2 - Market tightening (strong dollar represents a shortage of dollars for world transactions) may be a cycle reversal or at least a pause is near.
Chart 3 - When the US dollar supply increases (from a lower US dollar) anti US dollar trades do well.
Chart 4 - Copper (and oil) will show the way.
Original Post: https://ift.tt/S08AhwL
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