With U.S. equity indexes languishing in January, it’s clear that investors are anxious about the Federal Reserve’s tightening cycle.
George Goncalves, head of U.S. Macro Strategy at MUFG, talks with Jared Dillian of The Daily Dirtnap about whether and when the Fed might recognize a “pain threshold” for the stock market and walk back its hawkish tone.
At the same time, given President Joe Biden’s recent jawboning, it’s hard to see how the central bank can relent until it tames inflation. Goncalves and Dillian also discuss credit markets and messages from the yield curve. All told, the only certainty for investors in the coming months is uncertainty.
Recorded on February 1, 2022.
TIMESTAMPS / CHAPTERS:
00:00:48 Are Markets Pricing in Too Much Fed Tightening?
00:03:00 Walking the Tight Rope: The Fed’s Potential Mistakes in Addressing Inflation
00:08:03 What Are Your Thoughts on Current Financial Conditions?
00:09:54 Does the Fed Care About Equity Markets?
00:15:29 The Fed Funds Terminal Rate
00:19:42 The Inflation Outlook
00:21:50 A New Style of Bear Markets
00:24:47 Effects of Draining Market Liquidity
00:27:01 What is the Yield Curve Telling Us?
00:33:20 Finding Value in the Credit Markets
00:40:14 Synchronized Global Rate Tightening
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