Why did global equities stage their biggest rally since November 2020 upon the official launch of a monetary tightening cycle at the March 2022 meeting of the Federal Open Market Committee? Why was this decisive risk-on move in stocks led by the tech sector, as front-end bond yields surged, curves collapsed, and dot plots adjusted? And why are the vast majority of market commentators confused, with no consensus explanation forming for this indiscriminate demand for shares as the Fed finally moves off the zero bound? Weston Nakamura explains the sustained upside in global equity markets in the aftermath of Fed Chair Jerome Powell’s press conference. It has nothing to do with the central bank. Rather, it’s all about a surprise policy unveiling in China hours earlier, a major move that triggered a massive short-squeeze paused for (and resumed after) the FOMC policy release and kick-started a momentum feedback loop. Why was this explanation overlooked, particularly among U.S. investors? Because of a wide-scale mentality of “all eyes on the Fed,” by which any market reaction will be automatically and incorrectly attributed to policymakers in the Eccles Building. In this video, Weston shares real world examples of “all eyes on the Fed” (or, “no eyes anywhere else”), showing how that approach is detrimental to understanding market behavior.
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Listen to Real Vision on Twitter Spaces: “Fed Hikes Rates, Now What?” (March 16, 2022)
https://twitter.com/RealVision/status/1504212238961360901
Watch Real Vision Daily Briefing with Jim Bianco and Ash Bennington: “Do You Believe the Stock Market or the Bond Market?” (March 18, 2022)
https://youtu.be/VgP6q-ngreU
See Weston’s Twitter thread on the China policy surprise rally and heads-up into March FOMC
https://twitter.com/acrossthespread/status/1504104201705918476?s=21&t=Hr9sLnTLZihuOBcOO1f3xw
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