Submitted by Lance Roberts via RealInvestmentAdvice.com,
This week, the Fed will meet to decide the “fate of the universe,” as they are highly anticipated to announce the first rate hike in a decade. This is a momentous occasion as it marks the end of the “ultra-accommodative” monetary policy that has been the primary driver behind asset prices since the end of the financial crisis as shown in the chart below.
Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,
Can everyone saying “a 25 bps rate hike doesn’t change anything” or “manufacturing is a small part of the US economy today, so the ISM number doesn’t mean much” or “trade with China is only a few percent of US GDP, so their currency devaluation isn’t important” just stop?
Seriously. Can you just stop?
There is just one word to describe the thought process of the "smartest guys in the room", those who manage trillions in assets and respond to BofA's monthly Fund Manager Survey: confused.
As BofA's Michael Hartnett summarizes the confusion, while on one hand only 7% expect a "recession" in the coming year...
... expectations for flatter yield curve - that surest leading indicator of a recession - just hit the highest since June of 2011:
Among the many consensus expectations from Yellen tomorrow is that the Chairwoman - while hiking rates by 25 bps - will cushion the announcement in extensive language explaining why this is the most dovish rate hike in history, a message which will likely be conveyed by a decline in slope of the Fed's "dots", suggesting fewer hikes over the next year.
However, that is a problem and as Deutsche Bank explains there is really no such thing as a "dovish rate hike." Here is DB's Dominic Konstam:
The Fed is “right”
Shortly after the Fed adopted the so-called “clean relent”, in September, we explained the dollar dilemma Janet Yellen faces in hiking rates. The problem for the Fed - and this is well worn territory by now - is that even as 25 bps might fairly be characterized as merely “symbolic”, it still marks a notable policy divergence from the rest of the DM world which is still in easing mode.