Today the latest FOMC minutes confirmed what we had suspected: falling economic data and mayhem in Europe are prompting the US Fed to conjure ideas for the next round of monetary tricks.
Trouble is that nothing they scrape off the bottom of their empty barrel is likely to have much impact on the economy here. Risk markets have already ramped up in anticipation of more stimulus and as a result have become even more over-valued in the face of falling global growth. US bonds have also anticipated the prospects of more stimulus by selling off over the past 6 weeks. But if traders bought the rumor of more QE, this afternoon the trade seemed to be ‘sell the news’, as stocks fizzled and bond prices firmed into the close.
Gary Shilling was a guest on Bloomberg this afternoon discussing these developments. Here is a direct link.
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