Federal Reserve officials are split into two camps, according to Wall Street Journal's Jon Hilsenrath, those who believed that risks to the economy were materializing and those who wanted to wait and see. Either way, The Fed is confused and their 4-hikes in 2016 meme is disappearing fast.
As The Wall Street Journal reports,
Since the January FOMC statement, Janet has spoken twice and what seems like every Fed speaker has hit the headlines to explain their decisions (only to confuse the market more) leaving bonds and gold outperforming amid their clear confusion. The Minutes appear to confirm that confusion:
Yesterday, when summarizing the latest torrid move in stocks higher, we said that stocks surged 'on the biggest short-squeeze in 4 months."
Today, Credit Suisse picks up on this theme and asks "how much of this rally is short covering?" The bank's answer: "Looks like a lot based on this prime services data."
For equity market-neutral funds, there is a phrase more chilling than "worst since Lehman" and that is the quant meltdown in "August 2007" that put many funds out of business. While the mainstream media remains focused elsewhere, the last two weeks have seen equity market-neutral funds 'crash' - and today it has gotten much worse - as momentum factors diverge and memories of the 2007 bloodbath come back as this forced unwind drives the current ramp.
For the second time in four months, S&P has downgraded Saudi Arabia.
In late October, the ratings agency flagged sharply lower oil prices and the attendant fiscal deficit (16% in 2015) on the way to cutting the kingdom to A+ outlook negative.
At the time, S&P projected the deficit would amount to 10% of GDP in 2016. That turned out to be optimistic as the shortfall is now projected to be around 13% and that's assuming crude doesn't fall below $30 and stay there.