The jabbertalk parsers have rarely been in finer form than following yesterday’s latest Federal Reserve comedy hour. It is truly incredible to hear the Yellen-syllable analysis now engulfing the stock twits. Silliness aside, the fact remains: the Fed thinks it will begin hiking interest rates within the next 4 months. That would not just be ‘tapering’ but actual tightening my friends, and that is not bullish for today’s insanely valued financial assets.
There is much reason to doubt the Fed’s plan, of course. Their growth forecasts have been hopelessly optimistic with every single guess since 2007. And now, energy–the miracle driver of the anemic North American growth we have seen since 2009–is suffering body blows daily from a violent liquidity exodus likely just getting started. With government revenues plunging for the ride, and corporations and aging consumers buried under debt, the next great hope for surprise economic growth is nowhere to be seen.
Indeed, copper and energy prices are steadily weakening once more today as traditional safe-havens–Treasuries and the US dollar continue to rise. Note the move of the Swiss Central Bank today to implement negative deposit rates for their banks, is aimed at pushing safe haven-seeking-cash out of the Swiss Franc–and into other ‘safe-haven’ options like the U$. This is helping to strengthen the rise of the greenback while further weakening commodity and energy prices, US exports and S&P earnings. All our life’s a circle. The US 10 year Treasury yield continues to signal slowing growth.
