Via Christof Gisiger of Finanz und Wirtschaft,
James Bianco, president of Bianco Research, thinks that the Federal Reserve will have to jack up interest rates and the US stock market is running into trouble.
There were no surprises in Yellen's speech in Chicago on Friday in which the Fed chair confirmed the sudden and dramatic hawkish turn hinted at earlier in the week by Dudley and Williams, and which sent March rate hike odds from the low 30s to nearly 100% in the span of days.
Reflecting on the week - a week that saw 7 Fed speakers go full hawktard and drive rate hike odds at a pace never seen before, a week in which hard data tumbled to pre-election lows as 'soft' surveys all hit record highs, a week in which Small Cap stocks tumbled red (but but but they're domestic focused) as bank stocks soared, a week in which The Dow spiked to 21,100 on the back of the biggest retail ETF inflows in 3 years, and a week that saw a virtual currency's price top gold's for the firs time ever - we thought this was appropriate... (NSFW!!)
Following Yellen's speech which did not throw any curve balls to this week's sharply revised, hawkish narrative by her FOMC peers, a March rate hike - according to Goldman - appears to be in the books. In a note moments ago by Goldman's Jan Hatzius, the investment bank said that the bottom line is that "Fed Chair Yellen said today that a rate increase at the March FOMC meeting “would likely be appropriate”, as long as incoming data continue to confirm officials’ outlook.
While in recent weeks there has been a material increase in Fed balance sheet normalization chatter, according to a new report from Deutsche Bank analysts, it may all be for nothing for one simple reason: should the US encounter a recession in the next several years, the most likely reaction by the Fed would be another $1 trillion in QE, delaying indefinitely any expectations for a return to a "normal" balance sheet.