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Bonds Win Again
Bonds and Currencies win again. Interpreting the Fed minutes, it would seem the Fed has no intention of reducing the balance sheet starting in September, and one could argue from reading the statement it might not even be in 2017. Directly from the minutes:
Members agreed that, at this meeting, the Committee
should further clarify the time at which it expected to
begin its program for reducing its securities holdings in
a gradual and predictable manner. They updated the
postmeeting statement to indicate that while the Committee
was, for the time being, maintaining its existing
reinvestment policy, it intended to begin implementing
the balance sheet normalization program relatively soon,
provided that the economy evolved broadly as anticipated.
Several members observed that, in part because
of the Committee’s various communications regarding
the change, any reaction in financial markets to such a
change would likely be limited.
It has my belief since April that the Fed would not unwind the balance sheet in 2017, and today’s minutes seem to confirm that theory. The Bond market from the very beginning did not fear such a thing. Let’s go to the video tape: From our premium member area on April 6.
From reading today’s statement, it seems clear, that Fed will first look to stop its reinvestment policy and then look to pare down its balance, only after it has fully communicated how it will be done. Yields moved slightly lower on the news to 2.23 on the 10-Year.
Tomorrow a look at The Death of the Department Store a special look at why Department Store are antiquated and for the most part no longer need.
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With the Dollar once again back to weakening.
While equities, well, as usual, had no clue what was even going on.
Because if it had, it would have known this the best possible scenario for a bull market. Low Rates, Low Inflation, and Earnings growth. Ya can’t get a much better set up than that.
The free article picks of the day:
Michael Kramer and the Clients of Mott Capital own shares of GOOGL and NFLX
Disclaimer: Mott Capital Management, LLC is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendation made during the past twelve months. Past performance is not indicative of future performance.