The Weekly Market Compass #7
Santa's rally is here...or is it?
In a LinkedIn post last week, I wrote about the divergence between the Fed and the market expectations for rates using the dot plots as a case-in-point. And last week, well…the Fed pivoted.
The Fed pivoted from guiding the markets to being guided by the markets. And by markets, I am referring to the bond markets. Suddenly, the much-touted "higher-for-longer" stance vanished into thin air. The FOMC’s infamous dots now indicate expectations for a series of rate cuts next year.
And this is not just about the Fed. Everyone's starting to realize things aren't quite as they seem. Take China as a case-in-point. The PBOC has been aggressively injecting liquidity into the system. But so far, its not making much of the desired impact.
Looking at all these signs, it feels like we're on the cusp of something new.
So what’s really happening here?