Jerome Powell and the Fed

Posted: March 22, 2018 in Uncategorized

The first new chairman speech finally came and did not disappoint.

It kept the “benevolent” scenario by keeping a three times rising approach for the year (not four as many fear) for 2018, but it did increase the trajectory for 2019.

The inflation speech was a bit subdued as the US in March encountered a soft patch of  data.

In all it is a clear continuation of Chairwoman Yellen .

There are also quite a few odd things. Inflation is shown as not growing despite the Fed sees stronger economy and lower unemployment. In reality it should mean that the FED will tolerate some inflation after so many years.

My view

The Fed continues to be dovish, but it downplayed the risk of 4 hikes as there are so many risks to the scenario.

The biggest risk is still the Treasury yields. With so many US issuance to come (to finance tax cuts and infrastructure) – a break of 3% (10 US T bond) is just about when.

On the share side there will be clear winners and losers depending on earning growth (very different from the last 9 years). The era of ETF indexing domination over active management is truly ended (also ETF will have winners and losers).

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