Wednesday, April 5, 2017

Fed might take the punch bowl? Greedheads run to the exits!

I noticed the stock market had jumped on a very good ADP payrolls report, with the DOW staying up around 150 points most of the day. Then I returned to other work duties in the afternoon, flipped by the stock market numbers....and saw that the market closed DOWN on the day, and plunged 200 points after 1pm.

So what happened? The Federal Reserve indicated they might take their foot off the gas, and the greedheads panicked, because they feared their cocaine party might be ending.
Most Federal Reserve officials said they backed a policy change that would begin shrinking the central bank’s $4.5 trillion balance sheet later this year, as they reiterated their outlook for gradual interest-rate increases.

“Most participants anticipated that gradual increases in the federal funds rate would continue and judged that a change to the committee’s reinvestment policy would likely be appropriate later this year,” according to minutes of the Federal Open Market Committee’s March 14-15 meeting released Wednesday in Washington.

“Many participants emphasized that reducing the size of the balance sheet should be conducted in a passive and predictable manner,” the minutes showed.
Huh, you mean the "Trump Rally" wasn't based on actual economic growth, but instead was all about gambling on future policy and easy money? Imagine that!

That's not a good sign, when even the hint of interest rates going up sends people to the exits. And oil had also been on the rise until today, which is another sign that inflation may stay at its elevated level in the near future. Worth keeping an eye on as we head toward summer, because it seems like we're heading toward a squeeze play where one side has higher wages and the Fed tightening money, and the other side would be a slower economy that makes workers continue to fall behind.

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